Fill This Form To Receive Instant Help
Fill This Form To Receive Instant Help
Homework answers / question archive / What are the two reasons that drive the higher cost of debt in the emerging markets and two reason that drive the higher cost of equity in the emerging markets as the Cost of capital tends to be higher
What are the two reasons that drive the higher cost of debt in the emerging markets and two reason that drive the higher cost of equity in the emerging markets as the Cost of capital tends to be higher
Two factors that drive the cost of debt in emerging markets-
A. There are higher risk free rate in the emerging markets which will be driving the cost of debt up.
B. There is higher degree of risk premium associated with investment into the emerging market related to default and inflation.
Two factors which are leading to higher cost of equity are-
A. There is a higher degree of systematic risk associated with investment into the emerging markets.
B. There will be higher risk free rate which will be leading to higher cost of equity as well when we will calculate the cost of equity using Capital Asset pricing model.
