Question

When the economy starts expanding there is a/an __________ in the term premium and a/an ___________ in the risk premium. Group of answer choices increase, increase decrease, decrease increase, decrease decrease, increase

Answer 1

Increase in premium

Decrease in the risk premium

Step-by-step explanation:

Premium can be defined as the rewards earned by investors who has decided to engage in new businesses in a risk free state while risk premium is defined as the excess reward earned above the free risk rate that is expected to earn in the course of investment.In order word , it is a form of compensation for the risk undertaken .

As economy starts expanding , one of the consequences is that the premium will increase while the development reduces related risks and risk premium reduces.