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Author Question: A nation's country-risk premium can be divided into two major parts: a. Market risk premium and ... (Read 100 times)

roselinechinyere27m

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on: Jun 30, 2018
A nation's country-risk premium can be divided into two major parts:
 a. Market risk premium and foreign exchange risk premium.
  b. Market risk premium and credit risk premium.
  c. Market risk and expected inflation premium
  d. Market risk premium and political/social risk premium.

Question 2

Assume that foreign capital flows into a nation rise due to expected increases in stock market appreciation. If the nation has highly mobile international capital markets and a fixed exchange rate system, what happens to the real risk-free interest rate and real GDP in the context of the Three-Sector-Model?
 a. The real risk-free interest rate rises and real GDP falls.
 b. The real risk-free interest rate falls and real GDP rises.
 c. The real risk-free interest rate rises and real GDP remains the same.
 d. The real risk-free interest rate and real GDP remain the same.
 e. There is not enough information to determine what happens to these two macroeconomic variables.


Ashley I

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Reply #1 on: Jun 30, 2018
Answer to Question 1

.D

Answer to Question 2

.B


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