In August 1998, the risk premium rose because
A)investors feared a revival of inflation.
B)large tax increases in the United States reduced corporate profits and led to fears of increased defaults.
C)of the Asian financial crisis.
D)of fraud in the market for municipal bonds.

Question

Quizplus · Accepted Answer

The Asian financial crisis caused investors to see emerging markets as risky, which led to a higher risk premium. A and B are incorrect because there is no mention of inflation or tax increases in the question. D is incorrect because there is no mention of fraud in the municipal bond market.

In August 1998, the Risk Premium Rose Because