Question-2 (5 + 5 = 10 Points)

OF Corporation is a technology firm based in California, USA. It has come across two projects: Project-X and Project-Y. Project-X requires purchasing a small technology firm based in the United Kingdom (UK), while Project-Y requires purchasing a similar small technology firm based in Azerbaijan. Which of these two projects has more risk for OF Corporation? What return should OF Corporation expect from both projects? Use the following data to answer the questions. The data is based on the estimation of CAPM.

RETUS-TECH = 1% + 0.6(RETUK-INDEX RETRISK-FREE)	RETUK-TECH = 3% + 0.5(RETUK-INDEX RETRISK-FREE)	RETAZ-TECH = 2% + 0.9(RETUK-INDEX RETRISK-FREE)
RETUS-TECH = 3% + 0.9(RETUS-INDEX RETRISK-FREE)	RETUK-TECH = 4% + 0.8(RETUS-INDEX RETRISK-FREE)	RETAZ-TECH = 5% + 0.7(RETUS-INDEX RETRISK-FREE)
RETUS-TECH = 2% + 0.2(RETAZ-INDEX RETRISK-FREE)	RETUK-TECH = 1% + 0.6(RETAZ-INDEX RETRISK-FREE)	RETAZ-TECH = 6% + 0.3(RETAZ-INDEX RETRISK-FREE)
Market Risk Premium in USA = 10%	Market Risk Premium in Azerbaijan = 14%	Market Risk Premium in UK = 12%
Risk-free Rate in USA = 5%	Risk-free Rate in UK = 5%	Risk-free Rate in Azerbaijan = 5%

NOTE: RET_US-TECH is the return of technology index comprising of firms in the USA. RET_UK-TECH is the return of technology index comprising of firms in the UK. RET_AZ-TECH is the return of technology index comprising of firms in Azerbaijan.

NOTE: RET_US-INDEX is the return of market index in the USA. RET_UK-INDEX is the return of market index in the UK. RET_AZ-INDEX is the return of market index in Azerbaijan.

NOTE: RET_US-INDEX is the return of risk-free asset.