You are trying to estimate a country risk premium for Turkey. You find that S&P has assigned a B+ rating to Turkey and that Turkey has issued US dollar-denominated bonds that yield 12.415% in the market currently. (The US, a AAA-rated country, has dollar-denominated bonds outstanding that yield 0.664%.)

a. Estimate the country risk premium, using the default spread on the bond as the proxy.

b. If you were told that the standard deviation in the Turkish equity market was 24% and that the standard deviation in the Turkish eurobond was 10%, estimate the country risk premium.