Suppose you are valuing a Ruratarian company. The 10- year government bond rate in R$ is...

   

Transcribed Image Text:

Suppose you are valuing a Ruratarian company. The 10- year government bond rate in R$ is 9% and the CDS spread is 3%. Ruratarian government also has a 10-year $-denominated bond yielding 7%. The 10-year US government bond rate is 2%. What is the appropriate risk- free rate (ignore inflation for now): • 9% (rate in $R) • 7% (rate for Ruratarian $-denominated bond) • 6% (9% - 3%: true risk free rate in $R) • 4% (7% - 3%: true risk free rate for $-denominated Ruratarian bond) • 2% (US government bond) It depends Suppose you are valuing a Ruratarian company. The 10- year government bond rate in R$ is 9% and the CDS spread is 3%. Ruratarian government also has a 10-year $-denominated bond yielding 7%. The 10-year US government bond rate is 2%. What is the appropriate risk- free rate (ignore inflation for now): • 9% (rate in $R) • 7% (rate for Ruratarian $-denominated bond) • 6% (9% - 3%: true risk free rate in $R) • 4% (7% - 3%: true risk free rate for $-denominated Ruratarian bond) • 2% (US government bond) It depends Suppose you are valuing a Ruratarian company. The 10- year government bond rate in R$ is 9% and the CDS spread is 3%. Ruratarian government also has a 10-year $-denominated bond yielding 7%. The 10-year US government bond rate is 2%. What is the appropriate risk- free rate (ignore inflation for now): • 9% (rate in $R) • 7% (rate for Ruratarian $-denominated bond) • 6% (9% - 3%: true risk free rate in $R) • 4% (7% - 3%: true risk free rate for $-denominated Ruratarian bond) • 2% (US government bond) It depends Suppose you are valuing a Ruratarian company. The 10- year government bond rate in R$ is 9% and the CDS spread is 3%. Ruratarian government also has a 10-year $-denominated bond yielding 7%. The 10-year US government bond rate is 2%. What is the appropriate risk- free rate (ignore inflation for now): • 9% (rate in $R) • 7% (rate for Ruratarian $-denominated bond) • 6% (9% - 3%: true risk free rate in $R) • 4% (7% - 3%: true risk free rate for $-denominated Ruratarian bond) • 2% (US government bond) It depends Suppose you are valuing a Ruratarian company. The 10- year government bond rate in R$ is 9% and the CDS spread is 3%. Ruratarian government also has a 10-year $-denominated bond yielding 7%. The 10-year US government bond rate is 2%. What is the appropriate risk- free rate (ignore inflation for now): • 9% (rate in $R) • 7% (rate for Ruratarian $-denominated bond) • 6% (9% - 3%: true risk free rate in $R) • 4% (7% - 3%: true risk free rate for $-denominated Ruratarian bond) • 2% (US government bond) It depends Suppose you are valuing a Ruratarian company. The 10- year government bond rate in R$ is 9% and the CDS spread is 3%. Ruratarian government also has a 10-year $-denominated bond yielding 7%. The 10-year US government bond rate is 2%. What is the appropriate risk- free rate (ignore inflation for now): • 9% (rate in $R) • 7% (rate for Ruratarian $-denominated bond) • 6% (9% - 3%: true risk free rate in $R) • 4% (7% - 3%: true risk free rate for $-denominated Ruratarian bond) • 2% (US government bond) It depends Suppose you are valuing a Ruratarian company. The 10- year government bond rate in R$ is 9% and the CDS spread is 3%. Ruratarian government also has a 10-year $-denominated bond yielding 7%. The 10-year US government bond rate is 2%. What is the appropriate risk- free rate (ignore inflation for now): • 9% (rate in $R) • 7% (rate for Ruratarian $-denominated bond) • 6% (9% - 3%: true risk free rate in $R) • 4% (7% - 3%: true risk free rate for $-denominated Ruratarian bond) • 2% (US government bond) It depends Suppose you are valuing a Ruratarian company. The 10- year government bond rate in R$ is 9% and the CDS spread is 3%. Ruratarian government also has a 10-year $-denominated bond yielding 7%. The 10-year US government bond rate is 2%. What is the appropriate risk- free rate (ignore inflation for now): • 9% (rate in $R) • 7% (rate for Ruratarian $-denominated bond) • 6% (9% - 3%: true risk free rate in $R) • 4% (7% - 3%: true risk free rate for $-denominated Ruratarian bond) • 2% (US government bond) It depends

Answer rating: 100% (QA)

Since it is just a ruratarian company Not a MNC Its no... View the full answer