Risk-Free Rate Of Return

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Dictionary Says

Definition of 'Risk-Free Rate Of Return'

The theoretical rate of return of an investment with zero risk. The risk-free rate represents the interest an investor would expect from an absolutely risk-free investment over a specified period of time.
Investopedia Says

Investopedia explains 'Risk-Free Rate Of Return'

In theory, the risk-free rate is the minimum return an investor expects for any investment because he or she will not accept additional risk unless the potential rate of return is greater than the risk-free rate.

In practice, however, the risk-free rate does not exist because even the safest investments carry a very small amount of risk. Thus, the interest rate on a three-month U.S. Treasury bill is often used as the risk-free rate.
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'Risk-Free Rate Of Return'

  • How Risk Free Is The Risk-Free Rate Of Return?

    http://www.investopedia.com/articles/financial-theory/08/risk-free-rate-return.asp
    How Risk Free Is The Risk-Free Rate Of Return? December 22 2008 | Filed
    Under ยป Bonds, Financial Theory, Options. The risk-free ...

  • How To Calculate Required Rate Of Return

    http://www.investopedia.com/articles/fundamental-analysis/11/calculating-required-rate-of-return.asp
    ... you must look at factors such as the return of the market as a whole, the rate you
    could get if you took on no risk (the risk-free rate of return), and the ...

  • CFA Level 1 Study Guide - Portfolio Management - Rate of Return ...

    http://www.investopedia.com/exam-guide/cfa-level-1/portfolio-management/rate-of-return-basics.asp
    ... 2.6 Net Present Value and the Internal Rate of Return; 2.7 Money Vs. ... 11.10 Payback
    Period; 11.11 Net Present Value (NPV) and the Internal Rate of Return (IRR); ...

  • The real rate of return is the amount of interest earned over and ...

    http://www.investopedia.com/ask/answers/09/real-rate-return.asp
    ... The real rate of return is the amount of interest earned over and above the: a.
    discount rate. b. tax rate. c. inflation rate. d. risk-free rate of return. ...

  • Series 65 Study Guide - Quantitative Methods of Evaluating ...

    http://www.investopedia.com/exam-guide/series-65/quantitative-methods/rates-of-return-internal-rate-of-return.asp
    ... The most common method of measuring risk-adjusted return is the Sharpe Ratio, which
    is calculated by subtracting the risk-free rate of return from the rate of ...

  • Internal Rate Of Return: An Inside Look

    http://www.investopedia.com/articles/07/internal_rate_return.asp
    ... Figure 1: The formula for calculating internal rate of return (IRR ... of the 10 years
    with a 5% IRR, which is approximately the current Treasury (risk-free) rate ...

  • Financial Concepts: The Risk/Return Tradeoff | Investopedia

    http://www.investopedia.com/university/concepts/concepts1.asp
    ... On the lower end of the scale, the risk-free rate of return is represented by the
    return on US Government Securities because their chance of default is next to ...

  • Risk and Diversification: The Risk-Reward Tradeoff | Investopedia

    http://www.investopedia.com/university/risk/risk3.asp
    ... The risk-free rate of return is usually signified by the quoted yield of "US Government
    Securities" because the government very rarely defaults on loans. ...

  • 5 Ways To Rate Your Portfolio Manager

    http://www.investopedia.com/articles/stocks/11/5-ways-to-measure-money-managers.asp
    ... portfolio return. Hypothetically, investors should always be able to invest
    in government bonds and obtain the risk-free rate of return. ...

  • Understanding The Sharpe Ratio

    http://www.investopedia.com/articles/07/sharpe_ratio.asp
    ... Risk-Free Rate of Return (r f ) The risk-free rate of return is used to see if you
    are being properly compensated for the additional risk you are taking on ...

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