Risk Free Rate: An Undertaking
- Viaan
- Jul 13, 2023
- 1 min read
Written By-
A. Jagan
Senior Audit Manager,
What is risk free rate
Risk free rate is the absolute minimum rate that an investor should require. It depends on the growth rate of the investor home economy because capital invested should grow at least as fast as the economy.
What is Period to be considered for Rf
i. Type of assets being valued - The life /term and/ or maturity of the assets.
ii. The maturity of the risk-free rate applied will depend on the circumstances, but a common approach is to match the maturity of the risk-free rate to the time horizon of the cash flows being considered(risk-free rate corresponding to the time horizon)
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