Investors in emerging markets often require ______ added to their return because they are concerned about defaults and exchange rate volatility.
A) collateral deposits
B) credit swap default insurance
C) a risk premium
D) compensation for their executives

Question

Quizplus · Accepted Answer

A risk premium is an additional amount of return that investors expect to receive for taking on additional risk. In the case of emerging markets, investors are concerned about defaults and exchange rate volatility, which increases the risk of their investments. The risk premium compensates them for this added risk. Collateral deposits and credit swap default insurance are ways to mitigate this risk, but they are not the same as a risk premium. Compensation for executives is not directly related to the level of risk in the investment.

Investors in Emerging Markets Often Require ______ Added to Their