[Solution]From CPR to Corporate Equity Risk Premiums

Approach 1: Assume that every company in the country is equally exposed to country risk. In this case, Approach 1 E(RE) = risk-free Rate +…

Approach 1: Assume that every company in the country is equally exposed to country risk. In this case, Approach 1 E(RE) = risk-free Rate + CRP + ! (Mature ERP) Implicitly, this is what you are assuming when you use the local Government’s borrowing rate as your risk-free rate.
The post From CPR to Corporate Equity Risk Premiums

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