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Historically, the T-bill rate was 3.7% and the geometric average return on the stock market was 9.5%. If the current T-bill rate is 5.9, first
Historically, the T-bill rate was 3.7% and the geometric average return on the stock market was 9.5%. If the current T-bill rate is 5.9, first compute the CAPM discount rate on a project with a beta of 1.1.
You are not indifferent to the idiosyncratic risk of the project, so you will add an extra 6% on top to account for this. What is your project discount rate?
Answer in percent terms, i.e., 2.1% = 0.021, enter 2.1
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