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QUESTIONS AND SHORT PROBLEMS In the problems following, use an equity risk premium of 5.5 percent if none is specified. 1. Assume that you are
QUESTIONS AND SHORT PROBLEMS In the problems following, use an equity risk premium of 5.5 percent if none is specified. 1. Assume that you are valuing an Indonesian firm in U.S. dollars. What would you use as the riskless rate? 2. Explain why a six-month Treasury bill rate is not an appropriate riskless rate in discounting a five-year cash flow. 3. You have been asked to estimate a riskless rate in Indonesian rupiah. The Indonesian government has rupiah-denominated bonds outstanding, with an interest rate of 17%. S\&P has a rating of BB on these bonds, and the typical spread for a BB-rated country is 5% over a riskless rate. Estimate the rupiah riskless rate
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