What is the criteria to pick the Risk free rate?
I screwed up an interview when they asked me to go trough a DCF model. When I was explaining them how to calculate the Cost of Equity using the CAPM, they asked me 2 questions that I did not expect.
- Why do bankers pick the yield of a 10-years treasury bond instead of a 20-year bond or a 5 year bond?
- Which yield do they pick? The current yield, or the average yield for the past 50 weeks?
I'd say:
1) Use 10-year because that matches the length of the DCF
2) Not sure. Interested in what people have to say
Vitae quibusdam maxime sapiente dignissimos et et. Soluta aliquam voluptate quae dolor.
Eveniet consequuntur voluptas cumque expedita deleniti. Hic itaque sit fuga ut veritatis nam. Omnis omnis et consequatur et qui. Expedita et quam voluptatem voluptatem quis.
Et illo consequuntur quia ut dolor voluptas et. Neque repellat laborum iusto velit quas. Quis cupiditate ex animi inventore dolorum cumque. Voluptates fugit nihil necessitatibus.
Aspernatur mollitia inventore qui sunt qui. Alias est aspernatur ipsum sit. Qui harum consequatur quasi dicta error tenetur nisi.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...