Notices by John Coates (jciv@home.social)

If the US defaults, what should one use as a proxy for the risk-free rate?

Also, and not necessarily the same, what will financial analysts, companies and investors use as the risk-free rate in valuation?

@annmlipton What did they come up with?

@annmlipton Yield on Greek debt? 🤣

@annmlipton

For those who aren't finance wonks:

Risk-free rate is a theoretical concept that sets the lower bound on the cost of capital (e.g., cost to borrow or finance anything). As the hivemind tells us:

"The interest rate on a three-month US Treasury bill (T-bill) is often used as the risk-free rate for US-based investors. The three-month US Treasury bill is a useful proxy because the market considers there to be virtually no chance of the US government defaulting on its obligations."