In estimating the cost of equity, the rate of return on U.S.Treasury bills is often used as a proxy for the risk free rate of return.

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It is commonly accepted that the rate of return on U.S. Treasury bills is a good approximation of the risk-free rate of return because the U.S. government is considered to have a very low risk of default. Therefore, it is often used as a proxy for the risk-free rate when calculating the cost of equity.

In Estimating the Cost of Equity, the Rate of Return