Which of the following statements is correct regarding how to account for country and political...
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Finance
Which of the following statements is correct regarding how to account for country and political risks in cross-border valuation?
A.One can increase the cost of capital by the amount of credit spread on government bonds denominated in USD; the assumption made here is that the country risk faced by the project is systematic and strongly correlated with the sovereign risk.
B.One can increase the cost of capital by the amount of credit spread on government bonds denominated in USD; the assumption made here is that the country risk faced by the project is unsystematic and uncorrelated with the sovereign risk.
C.One can reduce the cost of capital by the amount of credit spread on government bonds denominated in USD; the assumption made here is that the country risk faced by the project is systematic and strongly correlated with the sovereign risk.
D.One can reduce the cost of capital by the amount of credit spread on government bonds denominated in USD; the assumption made here is that the country risk faced by the project is unsystematic and uncorrelated with the sovereign risk.
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