The risk premium on a commercial bank is ____ related to economic growth and ____ related to management skills.

Question

Quizplus · Accepted Answer

The risk premium on a commercial bank is positively related to economic growth because as the economy grows, the demand for loans increases, which leads to higher interest rates and a higher risk premium. The risk premium is negatively related to management skills because banks with better management skills are able to reduce their risk and, therefore, their risk premium.

The Risk Premium on a Commercial Bank Is ____ Related