An imaginary country in South America currently has the following economic and financial conditions:

• Inflation rate = 8%
• 10-year bond yield in local currency = 12%
• Credit default swap price = 200bp or 2%
• 10-year bond yield issued by this country in US dollars = 5%
• US 10-year Treasury bond yield = 3%

If the US's credit default swap price is zero, what risk-free rate should be used if constructing a dcf model for a company headquartered in this country?

Group of answer choices

5%

8%

10%

12%