Is inflation included in risk free rate when using CAPM? using, should, interest, included

nulry

 It seems that inflation should be add into interest rate to form nominal interest rate, isn't it?

frankchen99

the RFR in CAPM is a nominal rate, so we need to use inflation rate and real risk free rate to derive the nominal rate

nulry

 psuh~~~~~~~~~

nulry

 so, when we calculate cost of equity, if inflation rate is given, do we need to use nominal rate?

jesswong402

norminal rate = real rate * (1+inf rate)