top button
Flag Notify
    Connect to us
      Site Registration

Site Registration

What is the meaning of Risk Free Interest Rate?

+1 vote
202 views

Is there such thing exist, if yes then why it is risk free?

posted Mar 10, 2015 by Salil Agrawal

Share this question
Facebook Share Button Twitter Share Button LinkedIn Share Button

1 Answer

+1 vote
 
Best answer

Risk-free rate means the interest that an investor would expect from an absolutely risk-free investment over a given period of time.

Since the risk free rate can be obtained with no risk, any other investment will have additional risk.

As such a risk-free rate only exists in theory, it can be implemented practically by using government treasury bonds as the benchmark. These bonds still have a very small amount of risk but the likelihood of the government defaulting is very low.

answer Mar 10, 2015 by Amit Kumar Pandey
...