Question: Given the yield curve below, determine the value for the risk-free rate you would use to estimate cost of capital of a 5- and

Given the yield curve below, determine the value for the risk-free rate

Given the yield curve below, determine the value for the risk-free rate you would use to estimate cost of capital of a 5- and a 10-year project Yield Problem 5 1.600% 1.400% 1.200% 1.000% 0.800% 0.600% 0.400% 0.200% 0.000% 0 5 10 15 Maturity in Years Risk-free Market Year Return Return 2007 3.0% 6.0% 2008 1.5% -38.5% 2009 1.0% 22.5% Average 1.83% -3.33% 20 Wyatt Oil Return 5.5% -32.6% 19.6% -2.50% 25 30 Given the information in the table, estimate the market risk premium and Wyatt Oil's historical average excess return 1 35

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