Question: You are trying to estimate the ERP for Vortex, a U.S. company that derives 80% of its revenues in Brazil and 20% in the U.S.

You are trying to estimate the ERP for Vortex, a U.S. company that derives 80% of its revenues in Brazil and 20% in the U.S. The estimated ERP for the U.S. is 5%, the sovereign CDS spread for Brazil is 2%, and you estimate that equities in Brazil are 1.25 times more volatile than U.S. government bonds. What ERP will you use for Vortex?

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