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Risk Free rate - Why not based on 3 months T-bill?
For the below question, why 10-year Treasury bonds is used, but not 3-months T-bills?
Isn't both are issued by the Treasury and will be risk free?
CFA Mock Morning Q.73
A company wants to determine the cost of equity to use in calculating its weighted average cost of capital. The controller has gathered the following information:
Rate of return on 3-month Treasury bills
3.0%
Rate of return on 10-year Treasury bonds
3.5%
Market equity risk premium
6.0%
The company’s estimated beta
1.6
The company’s after-tax cost of debt
8.0%
Risk premium of equity over debt
4.0%
Corporate tax rate
35% |
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发表于 2011-7-11 18:26
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