I have gotten 2 questions wrong; once when I answered that the T-Bill was the risk free rate (answer said it was the T-Bond) and then I saw a similar question much later, and, having learned my lesson, I answered that the RFR was the T Bond (Wrong, said it was the T-Bill) Kind of a basic, stupid question at this point, but - which is it?!
both. bills < 1 year, bonds longer terms. neither. LIBOR < 1 year, swap rate longer terms. What country are you talking about?
I’m referring to the US. So, if you are charged with calculating the CAPM, and are given 90 day Tbills and 10 year T bonds, which would you use?
might help if you gave the two questions where they had the two different numbers used… so we can make some kind of collective generalization.
Smarshy Wrote: ------------------------------------------------------- > I’m referring to the US. So, if you are charged > with calculating the CAPM, and are given 90 day > Tbills and 10 year T bonds, which would you use? It should match your investment horizon. CAPM almost certainly would use the longer rate.
DarienHacker Wrote: ------------------------------------------------------- > Smarshy Wrote: > -------------------------------------------------- > ----- > > I’m referring to the US. So, if you are charged > > with calculating the CAPM, and are given 90 day > > Tbills and 10 year T bonds, which would you > use? > > It should match your investment horizon. CAPM > almost certainly would use the longer rate. I think that’s kind of arbitrary but CFAI stuff does that all the time - the RFR is something like the time horizon that you are looking at and for some reason unknown to me 10 yrs is the equity horizon.