Based on the information about the capital markets in the U.S. and in Paragon, a developing country.Based on the analyst's data, the estimated country equity premium for Paragon is closest to:
The country equity premium can be estimated as the sovereign yield spread times the volatility of the country's stock market relative to its bond market. Paragon's equity premium is (10.5% - 4.5%) x (35%/25%) = 6% x 1.4 = 8.40%.
Based on the analyst's data, the estimated country equity premium for Paragon is closest to:
