SIE practice questionmediumLiquidity Risk
Which of the following investments has the HIGHEST liquidity risk?
- AA limited partnership interest in a real estate DPP✓ Correct answer
- BU.S. Treasury bills
- CShares of a large open-end mutual fund
- DShares of a large-cap stock listed on the NYSE
Explanation
Why A — A limited partnership interest in a real estate DPP
Limited partnership (DPP) interests have the highest liquidity risk because there is no established secondary market for these securities. Selling them before the program terminates is extremely difficult. NYSE stocks (A) and T-bills (B) are highly liquid. Open-end mutual funds (D) can be redeemed at NAV daily. Illiquidity is one of the primary risks of DPP investments.
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