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Practitioners typically use which of the following for theirrisk-free rate?A. Historical average of 3-month...

Practitioners typically use which of the following for their risk-free rate?

A. Historical average of 3-month T-bill yield

B. current 10-year Treasury Bond Yields

C. current 3-month T-bill yield

D. historical average of 10-Year Treasury bond yields

Solutions

Expert Solution

Practitioners typically use the current long-term rate on the Treasury bonds for their risk-free rate. So, option B is correct.

The current 10-year Treasury Bond Yields are used for risk-free rate

Option A is incorrect because short-term rates are not used for risk-free rate because the projects are long-term

Option C is incorrect because short-term rates are not used for risk-free rate because the projects are long-term

Option D is incorrect because the current 10-year Treasury Bond Yields, not historical

jeff jeffy answered 2 years ago
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