A:

a. discount rate.



b. 90-day Treasury bill rate.



c. five-year Treasury note rate.



d. federal funds rate.




Answers: b



The 90-day Treasury bill rate is used because there is no credit risk, and the maturity is so short that there is no liquidity or market risk. The five-year Treasury also has no credit risk, but if interest rates rise, the market value could decline.



RELATED FAQS
  1. The interest rate used to define the “risk-free” rate of return is the

    a. discount rate.b. 90-day Treasury bill rate.c. five-year Treasury note rate.d. federal funds rate. Answers: bThe 90-day ... Read Answer >>
  2. Which economic factors impact treasury yields?

    Discover the economic factors that impact Treasury yields. Treasury yields are the benchmark yield for the rest of the world, ... Read Answer >>
  3. What is the difference between the Daily Treasury Long-Term Rates and the Daily Treasury ...

    Find out more about the daily Treasury long-term rates, daily Treasury yield curve rates and the difference between these ... Read Answer >>
  4. Will speculators buy or sell Treasury bond futures contracts if they expect interest ...

  5. Why are treasury bond yields important to investors of other securities?

    Learn about the wide-ranging impact of U.S. Treasury Bond yields on all other interest-bearing instruments in the economy ... Read Answer >>
  6. How are treasury bills taxed?

    Read about how the Internal Revenue Service collects taxes on treasury bills purchased from the United States government ... Read Answer >>
Related Articles
  1. Term

    Understanding Treasury Yield

    Treasury yield refers to the return on an investment in a U.S. government debt obligation, such as a bill, note or bond.
  2. Bonds & Fixed Income

    Introduction to Treasury Securities

    Purchasing bonds that are backed by the full faith and credit of the U.S. government can provide steady guaranteed income and peace of mind. Knowing the characteristics of each type of treasury ...
  3. Bonds & Fixed Income

    What's a 10-Year Treasury Note?

    A 10-year Treasury note is an intermediate debt obligation issued by the United States government, and with a ten-year maturity date.
  4. Investing Basics

    What is Treasury Stock?

    Treasury stock is a company’s own stock that it holds in its treasury for later use.
  5. Mutual Funds & ETFs

    Top 4 Treasurys ETFs (SHY, IEI)

    Learn about the specifics of the top four U.S. Treasury ETFs and how investors can buy ETFs that invest in bonds along the yield curve.
  6. Bonds & Fixed Income

    How To Read A T-Bill Quote

    If you want buy and sell US Treasury bills, you need to learn to read the quotes.
  7. Active Trading

    Buy Treasuries Directly From The Fed

    If you want government securities, go straight to the source. We'll show you how.
  8. Bonds & Fixed Income

    The Differences Between Bills, Notes And Bonds

    Treasury bills, notes and bonds are all marketable securities sold by the U.S. government to pay off debts and to raise cash.
  9. Mutual Funds & ETFs

    Long-Term Treasury Bond ETFs Are Attracting Assets in 2016 (TLT, TLH)

    Discover five exchange-traded funds that invest in U.S. Treasury long-term bonds and experienced large year-to-date capital inflows as of March 4, 2016.
  10. Home & Auto

    Buying a House Before an Interest Rate Hike

    Find out how a Fed rate hike would impact aspiring homebuyers, why rates increase, and whether now is the right time to buy a house.
RELATED TERMS
  1. Treasury Yield

    The return on investment, expressed as a percentage, on the debt ...
  2. 30-Year Treasury

    A U.S. Treasury debt obligation that has a maturity of 30 years. ...
  3. Treasury Direct

    The online market where investors can purchase federal government ...
  4. 10-Year Treasury Note

    A debt obligation issued by the United States government that ...
  5. United States Treasury Money Mutual Funds

    An investment fund that pools money from investors to purchase ...
  6. Spot Rate Treasury Curve

    A yield curve constructed using Treasury spot rates rather than ...
Hot Definitions
  1. Physical Capital

    Physical capital is one of the three main factors of production in economic theory. It consists of manmade goods that assist ...
  2. Reverse Mortgage

    A type of mortgage in which a homeowner can borrow money against the value of his or her home. No repayment of the mortgage ...
  3. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  4. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  5. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  6. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
Trading Center