You are trying to estimate the country equity risk premium for Poland.You find that S&P has assigned an A rating to Poland and that Poland has issued euro-denominated Bonds that yield 7.6%. in the market currently. Germany, a AAA-rated ocuntry, has euro-denominated bonds outstanding that yield 5.1%.

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

b)If you were told that the standard deviation in the Polish equity market was 25%and that the standard deviation in the polish euro bond was 15%,estimate the country risk premium.