The Required Rate of Return is the minimum rate of return acceptable by investors before they will commit money to an investment at a given level of risk. Most investors would not invest in an opportunity when the Required Rate of Return expectations are not met. When investors invest in risk- free instruments such as the treasury bills, the Risk-Free Rate serves as the Required Rate of Return and benchmark to guide investors on risky investment opportunities. When investors invest in risky instruments such as corporate bonds, equities listed on stock exchanges, or privately held businesses, then the Required Rate of Return should be above the risk-free rates to compensate for the additional risks. In business valuation analysis, the equity risk premium (which is the required rate of return on listed equities or privately held firms) is an important component in computing the Weighted Average Cost of Capital (WACC) which is the discount rate business valuators apply to convert future cash flows to the present value and the fair market value of a business entity.