In one of the CFAI mock exam questions, they provided both the rate of return on 3-month Treasury bills (3.0%) and the rate of return on 10-year Treasury bonds (3.5%), and asked to calculate the cost of equity.
I initially used the 3.0% since I recall RFR is based on T-Bills. But the answer key shows that 3.5% for T-Bonds is used. Is there a reason for this? Thanks a lot.作者: jim8z3 时间: 2011-7-11 19:54
That's a rather odd question because the 10-year bond has term risk. I always assumed that the RFR should be stripped of all possible known risks.
- Robert作者: Bluetick1010 时间: 2011-7-11 19:54
^ yeah i thought the same way, but apparently i was wrong on my selection of RFR too.作者: burnsy562000 时间: 2011-7-11 19:54
Thought the same, but it says clearly in the CFAI text to use the 10-year as this better matches the typical holding period of equity作者: ishfaque 时间: 2011-7-11 19:54
