pianok
#1
Why do we use the risk free rate to discount cash flows using this model?? and not the risk based on asset returns?

cpk123
#2
Again CFAI provides the answer

pianok
#3
cpk123â€¦ always there to help:) thanks

(1+Nominal risk free rate) / (1+inflation rate) - 1 = Real risk free rate.

Sometime in the question, real risk free rate is not direclty given. It is good to know how it is calculated.