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Country Long-Term Rating Adj. Default Spread Total Risk PremiumAlbania B1 650 14.75%Argentina B3 900 18.50%Armenia Ba2 400 11.00%Australia Aaa 0 5.00%

Austria [1] Aaa 0 5.00%Azerbaijan Ba1 300 9.50%Bahamas A1 140 7.10%Bahrain A2 160 7.40%Barbados A3 175 7.63%Belarus B1 650 14.75%Belgium [1] Aa1 70 6.05%Belize Caa1 1200 23.00%Bermuda Aaa 0 5.00%Bolivia B3 900 18.50%Bosnia and Herzegovina B2 750 16.25%

Botswana A1 140 7.10%Brazil Ba1 300 9.50%Bulgaria Baa3 260 8.90%Cambodia B2 750 16.25%Canada Aaa 0 5.00%Cayman Islands Aa3 120 6.80%Chile A1 140 7.10%China A1 140 7.10%Colombia Baa3 260 8.90%Costa Rica Ba1 300 9.50%Croatia Baa2 225 8.38%

Cuba Caa1 1200 23.00%Cyprus [1] Aa3 120 6.80%Czech Republic A1 140 7.10%Denmark Aaa 0 5.00%Dominican Republic B2 750 16.25%Ecuador Ca 260 8.90%Egypt Ba1 300 9.50%El Salvador Baa2 225 8.38%Estonia A1 140 7.10%Fiji Islands Ba2 400 11.00%Finland [1] Aaa 0 5.00%

France [1] Aaa 0 5.00%Germany [1] Aaa 0 5.00%Greece [1] A1 140 7.10%Guatemala Ba1 300 9.50%Honduras B2 750 16.25%Hong Kong Aa2 100 6.50%Hungary A3 175 7.63%Iceland Baa1 200 8.00%

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India Ba2 400 11.00%Indonesia Ba3 525 12.88%Ireland [1] Aaa 0 5.00%Isle of Man Aaa 0 5.00%Israel A1 140 7.10%

Italy [1] Aa2 100 6.50%Jamaica Ba2 400 11.00%Japan Aa3 120 6.80%Jordan Baa3 260 8.90%Kazakhstan Baa1 200 8.00%Korea A2 160 7.40%Kuwait Aa2 100 6.50%Latvia A3 175 7.63%Lebanon B3 900 18.50%Lithuania A2 160 7.40%Luxembourg [1] Aaa 0 5.00%

Macao Aa3 120 6.80%Malaysia A3 175 7.63%Malta [1] A1 140 7.10%Mauritius Baa2 225 8.38%Mexico Baa1 200 8.00%Moldova Caa1 1200 23.00%Mongolia B1 650 14.75%Montenegro Ba2 400 11.00%Morocco Ba1 300 9.50%Netherlands [1] Aaa 0 5.00%New Zealand Aaa 0 5.00%

Nicaragua B3 900 18.50%Norway Aaa 0 5.00%Oman A2 160 7.40%Pakistan B3 900 18.50%Panama Ba1 300 9.50%Papua New Guinea B1 650 14.75%Paraguay B3 900 18.50%Peru Baa3 260 8.90%Philippines B1 650 14.75%Poland A2 160 7.40%Portugal [1] Aa2 100 6.50%

Qatar Aa2 100 6.50%Romania Baa3 260 8.90%Russia Baa1 200 8.00%Saudi Arabia A1 140 7.10%Singapore Aaa 0 5.00%Slovakia A1 140 7.10%Slovenia [1] Aa2 100 6.50%South Africa A2 160 7.40%

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Spain [1] Aaa 0 5.00%St. Vincent & the Grenadin B1 650 14.75%Suriname Ba3 525 12.88%Sweden Aaa 0 5.00%Switzerland Aaa 0 5.00%

Taiwan Aa3 120 6.80%Thailand Baa1 200 8.00%Trinidad and Tobago Baa1 200 8.00%Tunisia Baa2 225 8.38%Turkey Ba3 525 12.88%Turkmenistan B2 750 16.25%Ukraine B1 650 14.75%United Arab Emirates Aa2 100 6.50%United Kingdom Aaa 0 5.00%United States of America Aaa 0 5.00%Uruguay B1 650 14.75%

Venezuela B1 650 14.75%Vietnam Ba3 525 12.88%

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Country Risk PremiumRegion9.75% Eastern Europe & Russia

13.50% Central and South America6.00% Eastern Europe & Russia0.00% Australia & New Zealand

0.00%Western Europe

4.50% Eastern Europe & Russia2.10% Caribbean2.40% Middle East2.63% Caribbean9.75% Eastern Europe & Russia1.05% Western Europe

18.00% Central and South America0.00% Caribbean

13.50% Central and South America11.25% Eastern Europe & Russia

2.10% Africa4.50% Central and South America3.90% Eastern Europe & Russia

11.25% Asia0.00% North America1.80% Caribbean2.10% Central and South America2.10% Asia3.90% Central and South America4.50% Central and South America3.38% Eastern Europe & Russia

18.00% Caribbean1.80% Western Europe2.10% Eastern Europe & Russia0.00% Western Europe

11.25% Caribbean3.90% Central and South America4.50% Africa3.38% Central and South America2.10% Eastern Europe & Russia6.00% Asia0.00% Western Europe

0.00% Western Europe0.00% Western Europe2.10% Western Europe4.50% Central and South America

11.25% Central and South America1.50% Asia2.63% Eastern Europe & Russia3.00% Western Europe

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6.00% Asia7.88% Asia0.00% Western Europe0.00% Financial Center2.10% Middle East

1.50%Western Europe

6.00% Caribbean1.80% Asia3.90% Middle East3.00% Eastern Europe & Russia2.40% Asia1.50% Middle East2.63% Eastern Europe & Russia

13.50% Middle East2.40% Eastern Europe & Russia0.00% Financial Center

1.80% Asia2.63% Asia2.10% Western Europe3.38% Africa3.00% North America

18.00% Eastern Europe & Russia9.75% Asia6.00% Eastern Europe & Russia4.50% Africa0.00% Western Europe0.00% Australia & New Zealand

13.50% Central and South America0.00% Western Europe2.40% Middle East

13.50% Asia4.50% Central and South America9.75% Asia

13.50% Central and South America3.90% Central and South America9.75% Asia2.40% Eastern Europe & Russia1.50% Western Europe

1.50% Middle East3.90% Eastern Europe & Russia3.00% Eastern Europe & Russia2.10% Middle East0.00% Asia2.10% Eastern Europe & Russia1.50% Eastern Europe & Russia2.40% Africa

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0.00% Western Europe9.75% Caribbean7.88% Caribbean0.00% Western Europe0.00% Western Europe

1.80%Asia

3.00% Asia3.00% Caribbean3.38% Africa7.88% Asia

11.25% Eastern Europe & Russia9.75% Eastern Europe & Russia1.50% Middle East0.00% Western Europe0.00% North America9.75% Central and South America

9.75% Central and South America7.88% Asia

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Estimating Country Risk PremiumsTo estimate the long term country risk premium, I start with the country rating (from Moody's: www.moodys.com) and estimate the default spread forthat rating (US corporates and country bonds) over the treasury bond rate. This becomes a measure of the added country risk premium for that country.I add this default spread to the historical risk premium for a mature equity market (estimated from US historical data) to estimate the total risk premium.In the short term especially, the equity country risk premium is likely to be greater than the country's default spread. You can estimate an adjusted country risk premium by multiplying the default spread by the relative equity market volatility for that market (Std dev in country equity market/Std dev in country bond)In this spreadsheet, I have used the global average of equity to bond market volatility of 1.5 to estimate the country equity risk premium.

Enter the current risk premium for a mature equity market

The US corporate spreads come from a deeper market, but the country bond spreads may be a more direct measure of country risk. To updat go to the bottom of the spreadsheet.Do you want to adjust the country risk premium for the additional volatility of the equity market?If no, use the country risk premium from the columns belowIf yes, you can adjust the country risk premium for the relative volatility of the equity market below:Enter the country risk premium from default spread =Enter the standard deviation in the equity market in the country =Enter the standard deviation in the long term bond issued by the country =

The adjusted country risk premium for your country is =

Country Region Long-Term Rating Adj. Default Spread Albania Eastern Europe & Russia B1 650Argentina Central and South America B3 900Armenia Eastern Europe & Russia Ba2 400Australia Australia & New Zealand Aaa 0Austria [1] Western Europe Aaa 0Azerbaijan Eastern Europe & Russia Ba1 300Bahamas Caribbean A1 140Bahrain Middle East A2 160Barbados Caribbean A3 175Belarus Eastern Europe & Russia B1 650Belgium [1] Western Europe Aa1 70Belize Central and South America Caa1 1200Bermuda Caribbean Aaa 0

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Bolivia Central and South America B3 900Bosnia and Herzegovina Eastern Europe & Russia B2 750Botswana Africa A1 140Brazil Central and South America Ba1 300Bulgaria Eastern Europe & Russia Baa3 260Cambodia Asia B2 750Canada North America Aaa 0Cayman Islands Caribbean Aa3 120Chile Central and South America A1 140China Asia A1 140Colombia Central and South America Baa3 260Costa Rica Central and South America Ba1 300Croatia Eastern Europe & Russia Baa2 225Cuba Caribbean Caa1 1200Cyprus [1] Western Europe Aa3 120Czech Republic Eastern Europe & Russia A1 140Denmark Western Europe Aaa 0Dominican Republic Caribbean B2 750Ecuador Central and South America Ca 260Egypt Africa Ba1 300El Salvador Central and South America Baa2 225Estonia Eastern Europe & Russia A1 140Fiji Islands Asia Ba2 400Finland [1] Western Europe Aaa 0France [1] Western Europe Aaa 0Germany [1] Western Europe Aaa 0Greece [1] Western Europe A1 140Guatemala Central and South America Ba1 300Honduras Central and South America B2 750Hong Kong Asia Aa2 100Hungary Eastern Europe & Russia A3 175Iceland Western Europe Baa1 200India Asia Ba2 400

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Peru Central and South America Baa3 260Philippines Asia B1 650Poland Eastern Europe & Russia A2 160Portugal [1] Western Europe Aa2 100Qatar Middle East Aa2 100Romania Eastern Europe & Russia Baa3 260Russia Eastern Europe & Russia Baa1 200Saudi Arabia Middle East A1 140Singapore Asia Aaa 0Slovakia Eastern Europe & Russia A1 140Slovenia [1] Eastern Europe & Russia Aa2 100South Africa Africa A2 160Spain [1] Western Europe Aaa 0St. Vincent & the Grenadines Caribbean B1 650Suriname Caribbean Ba3 525Sweden Western Europe Aaa 0Switzerland Western Europe Aaa 0Taiwan Asia Aa3 120Thailand Asia Baa1 200Trinidad and Tobago Caribbean Baa1 200Tunisia Africa Baa2 225Turkey Asia Ba3 525Turkmenistan Eastern Europe & Russia B2 750Ukraine Eastern Europe & Russia B1 650United Arab Emirates Middle East Aa2 100United Kingdom Western Europe Aaa 0United States of America North America Aaa 0Uruguay Central and South America B1 650Venezuela Central and South America B1 650Vietnam Asia Ba3 525

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Rating Default spread in basis pointsAaa 0Aa1 70Aa2 100Aa3 120A1 140A2 160

A3 175Baa1 200Baa2 225Baa3 260Ba1 300Ba2 400Ba3 525B1 650B2 750B3 900

Caa1 1200Caa2 1350Caa3 1500

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5.00% ! I use the risk premium fo r the United Stat es for thi s estimate The historical spreads represent an average over 5 years

the spreads

Yes ! Yes or No

5.50%61% ! Use annualized historical volatility35% ! Use annualized historical volatility

9.59%

Total Risk Premium Country Risk Premium Has to be sorted in ascending order 14.75% 9.75% Rating Default spread in basis points

18.50% 13.50% A1 14011.00% 6.00% A2 1605.00% 0.00% A3 1755.00% 0.00% Aa1 709.50% 4.50% Aa2 1007.10% 2.10% Aa3 1207.40% 2.40% Aaa 07.63% 2.63% B1 650

14.75% 9.75% B2 7506.05% 1.05% B3 900

23.00% 18.00% Ba1 3005.00% 0.00% Ba2 400

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12.88% 7.88%5.00% 0.00%5.00% 0.00%7.10% 2.10%6.50% 1.50%

11.00% 6.00%6.80% 1.80%8.90% 3.90%8.00% 3.00%7.40% 2.40%6.50% 1.50%7.63% 2.63%

18.50% 13.50%7.40% 2.40%5.00% 0.00%6.80% 1.80%7.63% 2.63%7.10% 2.10%8.38% 3.38%8.00% 3.00%

23.00% 18.00%14.75% 9.75%11.00% 6.00%

9.50% 4.50%5.00% 0.00%5.00% 0.00%

18.50% 13.50%5.00% 0.00%7.40% 2.40%

18.50% 13.50%9.50% 4.50%

14.75% 9.75%18.50% 13.50%

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8.90% 3.90%14.75% 9.75%

7.40% 2.40%6.50% 1.50%6.50% 1.50%8.90% 3.90%8.00% 3.00%7.10% 2.10%5.00% 0.00%7.10% 2.10%6.50% 1.50%7.40% 2.40%5.00% 0.00%

14.75% 9.75%12.88% 7.88%

5.00% 0.00%5.00% 0.00%6.80% 1.80%8.00% 3.00%8.00% 3.00%8.38% 3.38%

12.88% 7.88%16.25% 11.25%14.75% 9.75%

6.50% 1.50%5.00% 0.00%5.00% 0.00%

14.75% 9.75%14.75% 9.75%12.88% 7.88%

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Foreign Curren Local CurrencyAlbania B1 B1

Argentina B3 B3

Armenia Ba2 Ba2

Australia Aaa Aaa

Austria [1] Aaa Aaa

Azerbaijan Ba1 Ba1

Bahamas A3 A1

Bahrain A2 A2

Barbados Baa2 A3

Belarus B1 B1

Belgium [1] Aa1 Aa1

Belize Caa1 Caa1

Bermuda Aa1 Aaa

Bolivia B3 B3

Bosnia and Herzeg B2 B2

Botswana A2 A1

Brazil Ba1 Ba1Bulgaria Baa3 Baa3

Cambodia B2 B2

Canada Aaa Aaa

Cayman Islands Aa3 Aa3

Chile A2 A1

China A1 A1

Colombia Ba1 Baa3

Costa Rica Ba1 Ba1

Croatia Baa3 Baa2

Cuba Caa1 Caa1

Cyprus [1] Aa3 Aa3

Czech Republic A1 A1Denmark Aaa Aaa

Dominican Republi B2 B2

Ecuador Ca Ca

Egypt Ba1 Ba1

El Salvador Baa3 Baa2

Estonia A1 A1

Fiji Islands Ba2 Ba2

Finland [1] Aaa Aaa

France [1] Aaa Aaa

Germany [1] Aaa Aaa

Greece [1] A1 A1

Guatemala Ba2 Ba1

Honduras B2 B2

Hong Kong Aa2 Aa2

Hungary A3 A3

Iceland Baa1 Baa1

India Baa3 Ba2

Indonesia Ba3 Ba3

Ireland [1] Aaa Aaa

Isle of Man Aaa Aaa

Local-Currency Government Bond Rat

Foreign-Currency Government Bond R

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Tunisia Baa2 Baa2

Turkey Ba3 Ba3

Turkmenistan B2 B2

Ukraine B1 B1

United Arab Emira Aa2 Aa2

United Kingdom Aaa Aaa

United States of A Aaa Aaa

Uruguay B1 B1

Venezuela B2 B1

Vietnam Ba3 Ba3

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is.

a timely basis.

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