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What is the risk free rate

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You have been tasked to arrive at the cost of capital for the firm that you are employed in for a road show as you intend to raise more financing. It is a listed firm and based on your firm's returns and the past market returns, you have arrived at a beta of 1.6 for your firm. You have studied that the best estimate of the expected market risk premium is the past market risk premium and it is currently at 7%. You arrived at a cost of capital for this firm as 14%. Your manager wants to look at your numbers closely and asked you about the risk free rate you incorporated in your calculations. What is the risk free rate?

 

 

 

Reference no: EM132664692

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