Risk-free Rate Selection

CFA General
#1

Guys, need some help clarifying this:

I need to calculate a company WACC, the required return on equity is calculated through CAPM, what risk-free rate should I pick up? The average project maturity is 30 years, I think I should use the long-term (30y) risk free yield curve and update the value everytime is needed (update the wacc).

Some people told me to use the historical arithmetic average of the spot risk free rate of 10-year US treasury bond yields using daily data of 10 years.

I appreciate any help, thanks!

#2

you shouldn’t use the rate today, or update the rate over time. just go with the historical average.

the project maturity matching is a valid variation on the model. so two “right” answers.

#3

Thanks, appreciate your help.