Zona Hotels is a Latin American hotel company that derives 75% of its revenues in Brazil and 25% in Argentina and you have collected the following information on the countries: US $ 10-year bond rate Local Currency 10-year bond rate Brazil 4% 7.5% Argentina 8.5% 9% The risk-free rate in US dollars is 1.50% and the equity risk premium in the US (a mature market) is 5%. Estimate the risk-free for Brazil. Answer for part 1 If the equity is 1.30 times more volatile than the government bonds in emerging markets, estimate the equity risk premium for the company. Answer for part 2 If the beta for Zona is 1.20, Estimate the cost of equity for Zona in Brazilian Reais.