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How to Calculate Liquidity Premium and Real Risk

By Motley Fool StaffUpdated Apr 29, 2025 at 10:53 PM

Key Points

  • Investors demand higher returns from illiquid assets due to greater selling difficulty.
  • Liquidity premium can be calculated by comparing yields of similar liquid and illiquid bonds.
  • Real risk-free rate equals Treasury bond yield minus current inflation rate.

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