Since Microsoft has segment WACCS [weighted average cost of capital], so each business unit has their own discount rate, we decided why not create one specifically for the real estate team, given that their portfolio is nearly the same size as a lot of our business units and is as large or larger than many of the peers. Treasury has typically used historical betas, given sort of the market acceptance. However, in the recent markets, there were some challenges where the betas sometimes lost their stability with historical expectations, such as tech being somewhat lower than expected and REITS being somewhat higher than expected. So also given that we were evaluating that, we had to look at alternative solutions, and we determined that using VAR as total risk forward-looking betas ended up making the most sense in this case, as it provided a somewhat more stable solution over time. Given the highly levered nature of the business, though, they had to unlever the betas because we don't apply any of that financial leverage when we're doing the CAPM [capital asset pricing model] process that[C2] we then ran it through. The base rate that it sort of calculated based on all this ends up being lower than Microsoft or any of its business units, so it actually provides them a slight benefit in looking at different projects. Additionally, the base rate covers almost all projects that they look at because the peer group is pretty substantial and almost everything is in some of these larger, more developed markets. So that applies to projects where similar risk profiles to what the peer group would do or it would be reasonable for a member of the peer group to invest in.

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Financial Risk Management 2010 Transcript

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