Aswath Damodaran1 Into the Abyss: What if nothing is risk free? Risk free Rates: Looking at the numbers February 13, 2012

Aswath Damodaran2 Easy does it.. What is the risk free rate in a.US $ b.British Pounds c.Japanese Yen d.Swiss Francs e.Euros

Aswath Damodaran3 Climbing the ladder… These are 10-year government bond rates in the local currencies. Estimate the risk free rates in each currency (and you can use any of the information on the next 3 pages).

Aswath Damodaran4 1. Government bonds in $/Euro India, China, Korea and South Africa issue only local currency bonds

Aswath Damodaran5 2. The CDS Market India NA Korea 1.10% South Africa 1.53% Here is how you read this. To insure yourself against default risk in Abu Dhabi, you will have to pay 1.02% a year.

Aswath Damodaran6 3. Sovereign Default Spread Lookup Table Rating Default spread in basis points Aaa 0 Aa1 30 Aa2 60 Aa3 75 A1 90 A2 105 A3 120 Baa1 160 Baa2 180 Baa3 200 Ba1 250 Ba2 300 Ba3 350 B1 450 B2 550 B3 650 Caa1 750 Caa2 900 Caa3 1000