For Emerging Markets,the Recommended Input for the Risk-Free Rate for Computing

question 1

Multiple Choice

For emerging markets,the recommended input for the risk-free rate for computing beta is:

• A)The domestic government bond rate.
• B)The average of the inflation rates of developed nations.
• C)The average of the government bond rates of developed nations.
• D)The U.S.Treasury bond rate plus the local inflation rate minus the U.S.inflation rate.

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Definitions:

Collateralized Debt Obligation

A complex structured finance product that pools together cash flow-generating assets and repackages this asset pool into tranches that can be sold to investors.

CDO

Collateralized Debt Obligation, a type of structured asset-backed security (ABS) with multiple tranches that is issued by special purpose entities and collateralized by debt obligations.

Zero-Coupon Bond

A bond that does not pay periodic interest payments and is instead issued at a significant discount to its face value and pays its full face value at maturity.

Yield To Maturity

The total return anticipated on a bond if it is held until its maturity date, taking into account its current market price, par value, coupon interest rate, and time to maturity.