In late 2008,the average 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 financial crisis.
D) of fraud in the market for municipal bonds.

Question

Quizplus · Accepted Answer

The financial crisis that began in 2008 led to widespread uncertainty and instability in financial markets, causing investors to demand a higher premium for taking on risk. This led to an increase in the average risk premium. The other options do not accurately explain the rise in the risk premium during this period.

In Late 2008,the Average Risk Premium Rose Because