You are estimating the ERP for an emerging market. The following information has been collected: the risk
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Question:
You are estimating the ERP for an emerging market. The following information has been collected: the risk premium of the U.S. equity market is 5.5%, the sovereign CDS spread for the emerging market is 2%, and the emerging equity market is about 1.3 times more volatile than the emerging government bond market. what is the emerging market’s ERP using the combined method?
a. 2.6%
b. 7.5%
c. 7.15%
d. 8.1%
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