What is a Liquidity Premium?

What is meant by liquidity premium?

A liquidity premium is the term for the additional yield of an investment that cannot be readily sold at its fair market value. The liquidity premium is responsible for the upward yield curve typically seen across interest rates for bond investments of different maturities.

What is a Liquidity Premium?

How do I calculate liquidity premium?

Find the average of past Treasury yield rates and subtract the current rate from that average to estimate the liquidity premium of your investment.