The risk premium for securities in market

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Reference no: EM131324698

Market A deals in low-risk securities with an average interest rate of 5%. Market B deals in high-risk securities with an average interest rate of 7%. Suddenly there is a financial crisis and the economy enters recession.

Before the recession, the risk premium for securities in Market A over securities in Market B was ____________ .

As a result of the recession, one would expect the demand for securities in Market A to _____________ and interest rates to _____________ .

A. There was no risk premium; rise; fall

B. 2%; rise; fall

C. 2%; fall; rise

D. There was no risk premium; fall; rise

Reference no: EM131324698

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