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A key tool in both endeavors is a hurdlerate a rate of return that you determine as your required return for business and investment decisions. It deepens the acquaintance because you encounter hurdlerates in almost every aspect of finance, and it ruins it, by making these hurdlerates all about equations and models.
As the risk-free rate rises, expected returns on equities will be pushed up, and holding all else constant, stock prices will go down., and the reverse will occur, when risk-free rates drop.
I also report estimates of the default spreads based upon current yields on bonds in different ratings classes and the current riskfree rate. Since my interests lie in corporate finance and valuation, the statistics that I compute are numbers that I will find useful when doing a corporate financialanalysis or valuation of a company.
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