QUESTIONS 69 THROUGH 78 RELATE TO CORPORATE FINANCE

10-year bond is 8.5 percent. A similar maturity U.S. Treasury bond has a yield of 3.0 percent. The annualized standard deviation of the U.S. stock index S&P during the most recent year is 25% and the annualized standard deviation of the Pakistan stock index Karachi Stock Exchange is 35%. The annualized standard deviation of the Pakistan dollar-denominated 1-year government bond over the recent period was 22%. What is the estimated country equity premium for Pakistan based on Hassan SadoZye’s research? A. 6.25% B. 7.70% C. 8.75%