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% 8%

Argentina 6.5% 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.

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: 9% US $ 10-year Local Currency bond rate 10-year bond rate Brazil 4% 8% Argentina 6.5% 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. If the equity is 1.30 times more volatile than the government bonds in emerging markets, estimate the equity risk premium for the company. If the beta for Zona is 1.20. Estimate the cost of equity for Zona in Brazilian Reais