When using the CAPM to estimate long-term required rates of return, analysts will use which of the following rates in their calculation?
A)T-bill rate
B)long-term government bonds
C)long-term corporate bonds
D)prime rate

Question

Quizplus · Accepted Answer

In the Capital Asset Pricing Model (CAPM), the risk-free rate is a key component, and long-term government bonds are often used as a proxy for this rate because they are considered to have minimal default risk compared to other types of securities.

When Using the CAPM to Estimate Long-Term Required Rates of Return