5. Country Equity Risk Premiums. Using the century of equity market data presented in Exhibit 12.3, answer the following questions:

a. Which country had the largest differential between the arithmetic mean and geometric mean?

b. If a Swiss firm were attempting to calculate its cost of equity using this data, assuming a risk-free rate of 2.0% and a security beta of 1.4, what would be its estimated cost of equity using both the arithmetic mean and geometric means for the equity risk premium?