Distinguish between the concepts of the maturity-risk premium and the

Distinguish between the concepts of the maturity-risk premium and the liquidity-risk premium.

What will be an ideal response?

ANSWER

Maturity-risk premium is the additional return required by investors in longer-term securities to compensate them for
greater risk of price fluctuations on those securities caused by interest rate changes.
Liquidity-risk premium is the additional return required by investors for securities that cannot be quickly converted
into cash at a reasonably predictable price.