10 Year Risk-Free Rate but 5 Year Beta in Modelling? | 2026 Finance Interview Question

We explore the Capital Asset Pricing Model (CAPM) and the inconsistencies in using different time horizons for the risk-free rate and beta finance. This video explains why the risk free rate should align with long-term cash flows, while beta is estimated over a shorter period for relevance. Perfect for anyone in investment banking or financial modeling looking to understand the nuances of the capm model and what is capm.

Why do we use the 10-year government bond yield as the risk-free rate…But only 2–5 years of data to calculate beta?
Isn’t that inconsistent?
In this video from the Think Like an Analyst series, we break down one of the most commonly misunderstood valuation questions:
We cover:
What “risk” truly means in finance (variance, not danger)
Why short-term T-bills create reinvestment risk
Why long-term government bonds are used in valuation
Why 10-year bonds are standard (and why 30-year isn’t mandatory)\What beta actually measures
Why analysts use 2–5 years of regression data
The stability vs relevance trade-off in beta estimation
Adjusted beta formula (0.67 × Raw Beta + 0.33 × 1)
Why beta differs across Yahoo Finance, Moneycontrol, Bloomberg
Bottom-up beta explained with Hamada equation
How CAPM inputs serve different purposes

How to answer this question in finance interviews
If you're preparing for:
• Investment Banking interviews•
Private Equity roles•
Equity Research•
MBA finance placements (India or global)•
CFA exams•
Corporate finance roles
00:00 – The 10Y vs 5Y Question
01:00 – What Risk Really Means
01:38 – RISK FREE ASSET
03:36 – Why 10-Year Bond? Not 20-30 Year
04:15 – What Is Beta?
05:25 – Why 2–5 Years for Beta?
06:27 – Adjusted Beta Explained
08:10 – CAPM + Interview Answer

This breakdown will sharpen your valuation fundamentals.
CAPM is simple on paper. But understanding how practitioners actually estimate risk-free rate and beta is what separates average candidates from analysts.
Watch till the end for the exact interview-ready answer structure. And if you’re serious about finance careers, subscribe for deeper valuation breakdowns every week.

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Видео 10 Year Risk-Free Rate but 5 Year Beta in Modelling? | 2026 Finance Interview Question канала Richa Motwani