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).

Question

Quizplus · Accepted Answer

Currency risk premiums can be negative if investors perceive foreign assets as less risky than domestic assets, leading to a lower required return.

Which of the Following Statements About a Currency Risk Premium