1. Suppose you have calculated the estimates below based upon the data for Nextel Peru

Standard deviation of Perus equity market returns = 31% (annualized)

Standard deviation of Perus bond market returns = 15% (annualized)

Standard deviation of the MSCIs global returns = 17% (annualized)

Assumed global market risk premium (Rm-Rf) = 5% (annualized)

Average yield on Perus 30-year government bond = 6.6% (annualized)

Average yield on US 30-year government bond = 3.8% (annualized)

Risk-free rate = 3% (annualized)

Beta (NII holdings, MSCI) =0.77

Correlation (Peru equity mkt return, MSCI return) = 0.49

Using this information, calculate the required returns on equity using:

1. The standard CAPM with no adjustment for country risk, assuming the beta provided

2. The standard CAPM (assume beta provided) adjusted by adding a country risk term measured using two of the three measures of country risk and using two of the three methods of incorporating that measure of risk into the cost of capital.