1.The best way to incorporate country risk into emerging market company valuations is by adjusting the:

A)   cash flows.

B)   risk-free rate.

C)   beta.

D)   discount rate.

2.Which of the following is NOT an argument for adjusting cash flows to account for emerging market risks rather than adjusting the discount rate?

A)   Many factors directly affect cash flows.

B)   Companies respond differently to country risk.

C)   Country risk is a one-sided risk.

D)   Country risk is not diversifiable.

答案和详解如下：

1.The best way to incorporate country risk into emerging market company valuations is by adjusting the:

A)   cash flows.

B)   risk-free rate.

C)   beta.

D)   discount rate.

The correct answer was A)

Evidence suggests that country risks can be best captured by adjusting cash flows in a scenario analysis rather than including them into the discount rate.  The four arguments that support adjustments to cash flow rather than adjusting the discount rate are:

§ Country risks are diversifiable.

§ Many factors directly affect cash flows.

§ Companies respond differently to country risk.

§ Country risk is one-sided risk.

2.Which of the following is NOT an argument for adjusting cash flows to account for emerging market risks rather than adjusting the discount rate?

A)   Many factors directly affect cash flows.

B)   Companies respond differently to country risk.

C)   Country risk is a one-sided risk.

D)   Country risk is not diversifiable.

The correct answer was D)

The four arguments that support adjustments to cash flow rather than adjusting the discount rate are:

§ Country risks are diversifiable.

§ Many factors directly affect cash flows.

§ Companies respond differently to country risk.

§ Country risk is one-sided risk.