Required Rate of Return for different countries - Equity topic test, Pacific Wind case

[MissSongJ]

In CFAI Equity topic test, Pacific Wind case, answer for Q5 says:
Differences in GDP growth rates between countries may exist but this is not an important consideration specific to estimating required rate of return between the two countries.
I understand why other factors such as factors premium and FX rate forecasts are essential, but why is GDP growth not as important?
Thanks!

 

[abeshak sindhi]

The cbok mentions that in a global context exchange rates affect the required rate of investors and model issues.The 2 models are country spread and country risk model. under country spread you take into a/c country premium ie yield on emerging market bonds -yield on developed market bonds.so as far as the question is concerned gdp growth rates doesnt fit. you can refer to chp return concepts in the cbok.

 

[MissSongJ]

Re-read the part on International considerations. Thanks Abeshak!