In this workout, we're looking at Apple Sage group and Sony which are three large cap technology companies headquartered in the US the UK and Japan respectively.

We are asked to calculate the market risk premium for each country and to calculate the expected return for each company using cap in.

The data that were given is that Apple sage and Sony have a beta of 1.2 0.9 and 1.1 respectively.

We also have the expected return across their markets as a whole and we're given the risk free rate of return.

So the first thing was to calculate is the market risk premium, and we calculate this by taking the return on the markets. So for Apple that's going to be 6.5% and we deduct from that.

the risk-free rate of written if we apply the same formula to each of these three companies we can see that the market risk premium is fairly constant across these three countries.

The reason why we have different expected returns from the equity Market is because of different risk-free rates.

Moving on to look at the expected return under Cap N. We need to take the risk free rate of return in the US for Apple. We then need to add to this.

The beta of that company multiplied by the market risk premium of that country which gives us an expected return for Apple of 7.4% We can then copy this down and apply it to the other two companies as well.

We can answer the reason why Sage group PLC have a lower expected return is twofold firstly they have a lower beta than the other technology companies that we've identified. But also they have one of the lower risk-free rates of return in the UK, especially in comparison to the US which is part of the explanation for why Sage groups returns are lower than Apples because they're risk free rate of return in those countries is lower in the UK and higher in the US.