单选题 Ellison is an analyst of KM&G, a major U. S. based investment bank. Ellison is considering opening new stores in Brazil and wants to estimate its cost of equity capital for this investment. Ellison has found that:
●The yield on a Brazilian government 10-year U.S. dollar-denominated bond is 8%.
●A 10-year U.S. Treasury bond has a yield of 5%.
●The annualized standard deviation of the Sao Paulo Bovespa stock index in the most recent year is 43%.
●The annualized standard deviation of Brazil"s 10-year U.S. dollar-denominated bond in the most recent year is 27%.
●The appropriate beta to be used for the project is 1.2.
●The market risk premium is 7%.
●The risk-free interest is 3%.
Which of the following choices is closest to the appropriate country risk premium and the cost of equity that Ellison should use in his analysis?
country risk premium cost of equity for project
① 4. 8% 17.2%
② 4. 8% 23.3%
③ 7.6% 23.3%