Jamal Winfield is an analyst with Stolzenbach Technologies, a major computer services company based in the U.S. Stolzenbach’s management team is considering opening new stores in Mexico, and wants to estimate the cost of equity capital for Stolzenbach’s investment in Mexico. Winfield has researched bond yields in Mexico and found that the yield on a Mexican government 10-year bond is 7.7 percent. A similar maturity U.S. Treasury bond has a yield of 4.6 percent. In the most recent year, the standard deviation of Mexico’s All Share Index stock index and the S&P 500 index was 38 percent and 20 percent respectively. The annualized standard deviation of the Mexican dollar-denominated 10-year government bond over the last year was 26 percent. Winfield has also determined that the appropriate beta to use for the project is 1.25, and the market risk premium is 6 percent. The risk free interest rate is 4.2 percent. What is the appropriate country risk premium for Mexico and what is the cost of equity that Winfield should use in his analysis Country Risk Premium for Mexico Cost of Equity for Project（）①A. 4.53%19.06% ②B. 5.89%17.36% ③C. 4.53%17.36%
A. ①
B. ②
C. ③