What constitute risk free assets?

In CAPM, a risk free rate and hence a risk free asset is needed in the model. Usually the yield of a government debt is used to represent risk free rate. However, there is no specification which government debt should be chosen. In corporate finance, long term debts are often chosen. The justification is that most projects are long term based.

However, this is not consistent with the idea of CAPM. In CAPM, the risk free asset is the one with the lowest expected return. The return of long term government debts are usually higher than short term debts. So according to CAPM, the yield of long term debts should not be used as risk free rate.

In corporate finance and in investment theory, the yield of long term debts is often used in calculations. There are many justifications. However, this covers up the fundamental conflict between economic activities and security markets. Economic activities, with large amount of fixed cost and long expected lifespans of most assets, are inherently long term. Security markets, with low transaction costs, are inherently short term. CAPM, a model representing security markets, is inherently short term. 

This conflict between long term and short term perspectives is intrinsic. It should be dealt with directly. It should not, and can not be overlooked by blurring the concept of risk free rate.