aswathdamodaran.blogspot.com · 2020-02-19
· 2297d
Data Update 4: Country Risk and Currency Questions
This article examines how country risk and currency risk affect valuation and investment decisions for multinational companies and investors. The author provides frameworks for measuring country risk through scores, sovereign default spreads, and equity risk premiums, then separately addresses how to estimate risk-free rates across different currencies using government bond rates or synthetic approaches based on inflation differentials.
Metrics in this report
Base Equity Risk Premium
5.20%percent
S&P 500 at start of 2020
Default Spread for Ba2 Rating
2.51%percent
India local currency sovereign bonds, January 2020
Default Spread for Baa2 Rating
1.59%percent
Brazil local currency sovereign bonds, January 2020
Risk-Free Rate in Brazilian Real
4.26%percent
Derived from government bond rate minus default spread, January 1, 2020
Risk-Free Rate in Indian Rupees
4.95%percent
Derived from government bond rate minus default spread, January 1, 2020