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  "documentTitle": "Bear Stearns | Investment Banking Pitch Book | 36 slides",
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  "notes": "Part of a DCF Primer deck by Bear Stearns.",
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      "text": "The long-term rate (i.e., 20 years) most clearly matches the time frame of most investment or acquisition decisions.\nThe long-term rate extends beyond the forecast horizon to account for the terminal value.\nLong-term inflation expectations embodied in the long-term rate are less volatile than the short-term inflation expectations reflected in yields of shorter-term bonds.\nThe long-term rate is subject to fewer random disturbances compared to shorter-term rates.\nAlthough the long-term rate reflects greater price risk than bonds of a shorter duration, long-term treasuries are exposed to relatively low reinvestment risk.\nA potential problem with using the long-term yield, however, is that evidence suggests that long-term Treasury bonds are not risk-free as they have an estimated historical beta of approximately 0.10.",
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      "text": "Under the CAPM framework, the security that is used as a proxy for the risk-free rate should ideally have a beta of zero and a maturity which approximates the forecast horizon for the investment under consideration.",
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      "text": "(1) Based on the regression of the monthly returns of the Treasury Bond maturing on August 15, 2021 against those of the S&P 500 from December 29, 1995 through December 29, 2000.",
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      "text": "The Risk-Free Rate",
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