The prime rate is commonly used as a proxy for the risk-free rate in the capital asset pricing model (CAPM).

Name: The prime rate is commonly used as a proxy for the risk-free rate in the capital asset pricing model (CAPM).
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The risk-free rate in the Capital Asset Pricing Model (CAPM) is typically represented by the yield on government securities, not the prime rate. The prime rate is the interest rate that commercial banks charge their most creditworthy customers and is not considered risk-free.

The Prime Rate Is Commonly Used as a Proxy for the Risk-Free