Risk-Free Rate

The return on an asset assumed to carry no default risk, in practice a long-dated government bond in the SAME currency as the cash flows being discounted. Ten-year is the convention. Discounting euro cash flows at a US Treasury yield is simply the wrong number. Where the sovereign itself carries default risk, strip that spread out before using the yield.

Where Risk-Free Rate comes up

How Options Work: Calls, Puts, Payoffs and the First GreekOne right, one obligation, and a premium paid up front. Almost every option question is an argument about those three things.Read the guide — 8 min How to Build a DCF Model: Build Order, Terminal Value and the Sanity ChecksA DCF is 70% terminal value and 100% assumptions. Build it so both can be defended.Read the guide — 12 min Stocks and Bonds, and Why the Difference Decides EverythingOne makes you an owner and one makes you a lender. Every other difference is a consequence of that.Read the guide — 9 min

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