Country differences, such as differences in the risk-free interest rate and differences in risk premiums across countries, can cause the cost of capital to vary across countries.

Question

Quizplus · Accepted Answer

Yes, country differences can cause the cost of capital to vary across countries by affecting the risk-free interest rate and risk premiums. For example, a country with higher perceived risks (such as political instability or weak economic conditions) may have a higher risk premium, which would increase the cost of capital for investors in that country. Additionally, differences in inflation rates and exchange rates can also impact the cost of capital.

Country Differences, Such as Differences in the Risk-Free Interest Rate