· The minimum interest rate that an investor should accept is the yield that is available in the market place for a risk-free bond.
· The on-the-run Treasury security is most often used as they reflect the latest yields and are the most liquid securities.
· For corporate bonds, a risk premium can be added to the risk free rate.
Ideally, each cash flow should be valued using the spot rate corresponding to its maturity. Bond price is inversely related to discount rate. Can add risk premium to the risk free rate or series of risk free sport rates
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