You are estimating the ERP for an emerging market. The following information has been collected: the risk premium of the U.S. equity market is 5.5%, the sovereign CDS spread for the emerging market is 2%, and the emerging equity market is about 1.3 times more volatile than the emerging government bond market. what is the emerging markets ERP using the combined method?

a.

2.6%

b.

7.5%

c.

7.15%

d.

8.1%