How could concern over an election drive up the risk, Finance Basics

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How could concern over an election drive up the risk

Investors became nervous just before the 2002 Brazilian presidential election. As a result, the risk premium on Brazilian government debt increased dramatically and Brazil's currency depreciated significantly.

a. How could concern over an election drive up the risk premium?

b. How was the risk premium connected to the value of the currency?

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Finance Basics: How could concern over an election drive up the risk

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Finance Basics: How could concern over an election drive up the risk

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