The Appropriate Risk-Free Rate to Use When Calculating the Cost

question 4

Multiple Choice

The appropriate risk-free rate to use when calculating the cost of equity for a firm is

• A) a long-term Treasury rate.
• B) a short-term Treasury rate.
• C) an equal mix of short-term and long-term Treasury rates.
• D) None of the above

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Definitions:

Authority Limitation

Authority Limitation refers to any restrictions placed on the power or official capacity in which an individual or entity can act within legal or organizational contexts.

Real Property

Land and any permanent structures attached to it, such as buildings, homes, and other fixtures.

Apparent Authority

Apparent Authority refers to a situation where a third party reasonably believes that an agent has the authority to act on behalf of another, even if such authority has not been explicitly granted.

Enforceable Contract

A legally binding agreement between parties that can be enforced by law if not fulfilled.