Based on the analyst’s data, the estimated country equity premium for Paragon is closest to:
An analyst gathered the following information about the capital markets in the United
States and in Paragon, a developing country.
Selected Market Information
Yield on U.S. 10-year Treasury bond 4.5%
Yield on Paragon 10-year government bond 10.5%
Annualized standard deviation of Paragon stock index 35.0%
Annualized standard deviation of Paragon dollar-denominated government bond 25.0%
A. 4.29%.
B. 6.00%.
C. 8.40%.
Ans: C. 8.40%.
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