When Using the CAPM to Estimate the Cost of Equity

question 42

Multiple Choice

When using the CAPM to estimate the cost of equity for evaluation of investment proposals,the appropriate substitute for the risk-free rate of interest is:

• A)the yield on 10-year government bonds.
• B)the yield on three-year government bonds.
• C)the yield on 90-day treasury notes.
• D)the yield on a government security whose term to maturity matches the life of the proposed project.

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Definitions:

Remove Risk Items

The process of eliminating objects or substances that could cause harm or pose a danger, particularly in a healthcare or therapeutic setting.

Sentinel Event

An unexpected occurrence involving death or serious physical or psychological injury, or the risk thereof, which necessitates immediate investigation and response.

Suicidal Tendencies

Patterns of thoughts or behaviors that indicate a higher risk of attempting suicide, often seen in individuals with a history of suicidal thoughts or attempts.

Shame

A painful feeling arising from the consciousness of something dishonorable, improper, or ridiculous done by oneself or another.