1. Country risk included in the risk premium in interest rates refers to the: a. additional costs incurred when loans are made in currencies other than the domestic currency. b. possibility that loans in some countries may not be repaid because of political upheaval. c. expectation that the exchange rate may change in the future. d. potential change in the terms of trade between countries.

Question

Koen Roy

Social Studies

26 March, 15:31

1. Country risk included in the risk premium in interest rates refers to the: a. additional costs incurred when loans are made in currencies other than the domestic currency. b. possibility that loans in some countries may not be repaid because of political upheaval. c. expectation that the exchange rate may change in the future. d. potential change in the terms of trade between countries.

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Mike Lamb · Answer 1

b. Possibility that loans in some countries may not be repaid because of political upheaval.

Explanation:

This is what is included in the country risk in the risk premium in interest rates. The risk premium refers to a return on investment that a person expects an investment will yield. If a country experiences political upheaval, then there is a good chance that the loans of the country will not be repaid due to the conflict. This is referred to as "country risk."