Evaluate the following in terms of their use as a risk-free rate: a 6-month U.S. Treasury, a 10-year U.S. Treasury, the yield on a 10-year MicroSoft bond. the yield on a 10-year Puerto Rican bond. How does the Federal Reserve (Fed) affect the risk-free rate? Suppose the Fed, as promised, raises the federal funds rate by 0.75% by the end of 2018. How will this action affect the value of a Dow-30 company? The multiples of most Dow-30 companies? Explain.

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The 6month US Treasury is often considered a closer approximation to a riskfree rate compared to a 1... View the full answer