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What is the risk-free rate of interest (multiplicative form) when the pure rate is 3%, the inflation premium is 6% and the ri
Matching long-term uses of cash with long-term financing sources:
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Answer #1

Risk free rate = ((1 + pure rate) * (1 + inflation premium)) - 1

The risk premium is not added because we are calculating the risk free rate

Risk free rate = ((1 + 3%) * (1 + 6%)) - 1

Risk free rate = 9.18%

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