Canadian Securities Course (CSC) Level 2 Practice Exam

What aspect of liquidity is important when considering common shares according to the text?

1. Desire to buy/sell without any changes in the market

2. Desire to control market prices

3. Desire to influence market trends

4. Desire to speculate in the market

The correct answer is: Desire to buy/sell without any changes in the market

The correct answer highlights the significance of being able to buy or sell common shares quickly without impacting the market price. Liquidity is a critical factor for investors as it ensures that they can enter or exit positions efficiently. High liquidity means that there are enough buyers and sellers in the market, allowing for trades to occur with minimal price fluctuations, thus enhancing the overall trading experience. The other options touch on different desires an investor might have—such as controlling prices, influencing trends, or speculating. However, these aspects do not directly relate to the practical aspect of liquidity, which focuses on the ease and efficiency of executing trades without significant market impact. An emphasis on liquidity allows investors to manage their portfolios and respond to market conditions effectively.