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LOS e, (Part 2): Discuss the risk factors to be assessed in determining a country risk premium for use in estimating the required return for foreign securities.ffice ffice" />
Q1. The country risk premium considers which of the following types of risk:
A) company-specific risk.
B) exchange rate risk.
C) interest rate risk.
Correct answer is B)
The country risk premium includes business, financial, liquidity, exchange rate, and country risk.
Q2. Which of the following is least likely a risk factor for a country’s risk premium?
A) Business risk.
B) Technology risk.
C) Exchange rate risk.
Correct answer is B)
Technology risk is not considered a relevant risk factor in assessing a country’s risk premium.
Q3. Which of the following statements regarding a country risk premium 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.
Correct answer is C)
Country risk arises from unexpected not expected economic and political events. Countries with small or inactive capital markets offer liquidity risk, not countries with large and active capital markets. Exchange rate risk must always be taken into account.
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发表于 2009-3-2 14:21
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