facebookHi, for the risk-free rate in the CAPM formula. Should i use the market yield or the coupon rate of the 10 -year bond as the risk free rate ? - Seedly

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Hi, for the risk-free rate in the CAPM formula. Should i use the market yield or the coupon rate of the 10 -year bond as the risk free rate ?

Anyone with experience using this CAPM Formula willing to share their experience and help?

Discussion (4)

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Textbook answer would be 10 years bond coupon rates.

From our finance classes, the answer is to take the coupon rate of the 10 year bond. This is because of the idea we should be adopting something that is close to risk free. The market yield is not a good "close to risk free" instrument

Billy

13 Jan 2020

Development & Acquisitions Manager at Real Estate Private Equity

For valuation taught in school, it would usually be the 10-year bond as the risk free rate. That's h...

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