honeycfa

Which of the following statements regarding an equity risk premium for foreign investments is most accurate?

A) Country risk arises from expected economic and political events.

B) Exchange rate risk is relatively small and can be ignored.

C) Firms in different countries assume significantly different financial risk.

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Country risk arises from unexpected not expected economic and political events. Exchange rate risk must always be taken into account.

honeycfa

Which of the following is least likely a risk factor in an equity risk premium for foreign investments?

A) Technology risk.

B) Business risk.

C) Exchange rate risk.

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Technology risk is not considered a relevant risk factor in assessing a country’s equity risk premium. The relevant factors include business risk, financial risk, liquidity risk, exchange rate risk, and country risk.