The Correct Treasury Rate to Use in Calculating the Cost

question 28

True/False

The correct Treasury rate to use in calculating the cost of equity (when using the CAPM) for a firm is a short-term rate.

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Definitions:

Non-monetary Assets

Assets that are not in the form of cash or cannot be easily converted to cash, such as property, plant, and equipment.

Spot Rate

The current price in the foreign exchange market at which one currency can be exchanged for another currency.

Closing Rate

The closing rate is the exchange rate of a foreign currency against a home currency at the close of the accounting period, used in translating foreign currency financial statements.

Forward Rate

The agreed-upon future exchange rate between two currencies in a forward contract.