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Question
Which of the following is/are FALSE regarding risk-free rates?
I) The 30-year Treasury bonds match the cash flow streams of a company better, and therefore should be used over 10-year bonds in estimating the risk-free rate.
II) One should use government bond yields denominated in the same currency as the company’s cash flow to estimate the risk-free rate.
III) One should ensure that the inflation rate embedded in the cash flows is consistent with the inflation rate embedded in the government bond rate being used.
a) I only.
b) II only.
c) III only.
d) I and III only.
Answer
This answer is hidden. It contains 14 characters.
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