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Discounting [22]

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Bullet points include: Discount rates can be derived using expected returns that include risk adjustments. Doing so presumes risk adjustments will be earned, lowering immediate liability valuations Using risk-free discount rates means value derived from investing in risky assets is not assumed to accrue immediately, but rather only on a realised basis after the risk has been borne Possible sources referred include (all examples of replicating portfolios): Government debt yield curves Swap rates Corporate bond rates (not normal for a risk-free rate) Option pricing methods applied to option prices

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