Which of the following statements best defines the country risk premium?
A) A premium that reflects the risk that arises from investing or doing business in a particular country and it depends on the country's business climate.
B) A premium that reflects interest rate risk.
C) A premium added to the equilibrium interest rate on a security if that security cannot be converted to cash on short notice and at close to "fair market value."
D) A premium that reflects the difference between the interest rate on a U.S. Treasury bond and a corporate bond of equal maturity and marketability.
E) A premium that results when a bond is denominated in a currency other than the investor's home currency and results from the possibility that an exchange rate change will lead to a loss in a bond's value.
Correct Answer:
Verified
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