Musings on Markets

MAY 6, 2022

There are three possible explanations for the divergence: Short term versus Long term : The consumer survey extracts an expectation of inflation in the near term, whereas the treasury markets are providing a longer term perspective, since I am using ten-year rates to derive the market-implied inflation.

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Risk Premium Treasury Start-ups Equity 92

Musings on Markets

JULY 13, 2022

Country Risk: Currency and Cost of Capital As a final part to this post, to see the shifts in country risk that we have seen in 2022, let’s start with an assessment of risk free rates.

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Risk Premium Risk-free Rate Start-ups Equity 81

Musings on Markets

MARCH 25, 2021

The first has been the steep rise in treasury rates in the last twelve weeks, as investors reassess expected economic growth over the rest of the year and worry about inflation. Coming in 2020, the ten-year T.Bond rate at 1.92% was already close to historic lows. In particular, the Fed's own assessments of real growth of 6.5%

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Equity Risk-free Rate Treasury Start-ups 52

Musings on Markets

JANUARY 8, 2022

Risk free Rates : While the US treasury bond rate is widely reported, I contrast its actual value with what I call an intrinsic measure of the rate, computed by adding the inflation rate to real growth each year at this link.

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Risk Premium Start-ups Market Capitalization Corporate Finance 91

Musings on Markets

AUGUST 5, 2023

In short, the expected return on a risky investment can be constructed as the sum of the returns you can expect on a guaranteed investment, i.e., a riskfree rate, and a risk premium, which will scale up as risk increases. The risk premium that you demand has different names in different markets. 00254 + 1.4543 (.04)

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Risk Premium Equity Start-ups Treasury 78

Musings on Markets

FEBRUARY 15, 2023

As I have argued in all four of my posts, so far, about 2022, it was year when we saw a return to normalcy on many fronts, as treasury rates reverted back to pre-2008 levels, and risk capital discovered that risk has a downside.

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Equity Start-ups Risk Premium Risk-free Rate 52

Musings on Markets

JANUARY 20, 2021

If, on the other hand, investors are risk neutral, the price of risk will be zero, and investors will buy risky business, stocks and other investments, and settle for the risk free rate as the expected return. If you buy into this measure of equity risk premiums, consider its limitations.

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Risk Premium Risk-free Rate Equity Dividends 52

ThomsonReuters

MAY 6, 2021

Discounted cash flow approaches are also utilized within other functions of an organization, such as treasury, budgeting, financial planning and analysis, and tax planning. The Codification often provides guidance on how to select a discount rate for a particular area of accounting. Understanding the Calculation and the Output.

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Discounted Cash Flow Risk-free Rate Risk Premium Intangible Assets 52

Musings on Markets

MAY 24, 2021

Interest rates : To understand the link between expected inflation and interest rates, consider the Fisher equation, where a nominal riskfree interest rate (which is what treasury bond rates) can be broken down into expected inflation and expected real interest rate components.

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Treasury Start-ups Risk Premium Price to Book 55

Musings on Markets

JANUARY 21, 2023

That said, when investors buy equities, it would be both irrational and illogical to settle for expected returns that are less than what you can earn on risk free or guaranteed investments, though behavioral finance suggests that both irrationality and illogic are persistent human traits.

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Equity Risk Premium Start-ups Dividends 70

Brian DeChesare

FEBRUARY 28, 2024

Treasury yield at? Rates: Is the “risk-free rate” truly risk-free ? Rate Changes: If interest rates are set to rise over the next year, how would you structure your portfolio? A few examples: Markets: What’s the 10-year U.S. What about gilts (U.K.), What does duration mean intuitively?

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Equity Banking Start-ups Finance 59

Valutico

OCTOBER 20, 2022

Rf = Risk-free Rate. Rm – Rf) = Equity Market Risk Premium. Risk free rate (can use 10y Treasury). The details of how the CAPM works is beyond the scope of this article but in short, the formula is as follows: Ce = Rf + B x (Rm – Rf) + Cp. Ce = Cost of Equity. B = Beta. (Rm

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Discounted Cash Flow Terminal Value Weighted Average Cost of Capital Net Present Value 52

Musings on Markets

JULY 25, 2023

Your choice of currency will affect your cash flows and your discount rates, but only because each currency brings it's own expectations of inflation, with higher inflation currencies leading to higher growth rates for cash flows and higher discount rates. the riskfree rate in Egyptian pounds is 14.38%.

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Risk Premium Equity Start-ups Risk-free Rate 52