Tuesday, June 10, 2008

*** New Video: V7C: The Risk-Free Rate

The rate used to discount future cash flows is based on the risk-free rate plus a premium for the risk of those particular cash flows. In effect, the risk-free rate is the lowest return, or the lowest rate of interest, that investors would be willing to accept (for a riskless investment).

This video goes into what the risk-free rate is and what benchmarks might be used to establish its value.

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