Which of the Following Statements About a Currency Risk Premium

question 29

Multiple Choice

Which of the following statements about a currency risk premium is not true?

• A)They arise since domestic and foreign assets may be imperfect substitutes.
• B)They arise since investors may have a more difficult time gathering information about foreign assets.
• C)They may arise because foreign assets may be exposed to risks of seizure by foreign governments.
• D)They can only be positive (not negative).

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Definitions:

Marginal Analysis

An evaluation method that weighs the benefits of an additional unit of consumption or production against the cost to understand decision-making processes.

Opportunity Cost

The worth of the most favorable option given up when a choice is made.

Taco

A traditional Mexican dish consisting of a small hand-sized tortilla topped with a filling.

Burrito

A Mexican-inspired dish consisting of a large wheat flour tortilla wrapped or folded around a filling that typically includes meat, beans, rice, cheese, and vegetables.