What is 'RiskFree Return'
Riskfree return is the theoretical rate of return attributed to an investment with zero risk. The riskfree rate represents the interest on an investor's money that he or she would expect from an absolutely riskfree investment over a specified period of time.
BREAKING DOWN 'RiskFree Return'
In theory, the riskfree rate is the minimum return an investor should expect for any investment, as any amount of risk would not be tolerated unless the expected rate of return was greater than the riskfree rate.
In practice, however, the riskfree rate does not technically exist; even the safest investments carry a very small amount of risk. Thus, investors commonly use the interest rate on a threemonth U.S. Treasury bill as a proxy for the riskfree rate because shortterm governmentissued securities have virtually zero risk of default.

RiskFree Rate Of Return
The theoretical rate of return of an investment with zero risk. ... 
RiskFree Asset
An asset which has a certain future return. Treasuries (especially ... 
RiskNeutral Measures
A theoretical measure of probability derived from the assumption ... 
Capital Allocation Line  CAL
A line created in a graph of all possible combinations of risky ... 
Market Risk Premium
The difference between the expected return on a market portfolio ... 
OptionAdjusted Spread (OAS)
A measurement of the spread of a fixedincome security and the ...

Markets
RiskFree Rate of Return
The riskfree rate of return is the theoretical rate of return of an investment with zero risk. The riskfree rate represents the interest an investor would expect from an absolutely riskfree ... 
Managing Wealth
Understanding Market Risk Premium
Market risk premium is equal to the expected return on an investment minus the riskfree rate. The riskfree rate is the minimum rate investors could expect to receive on an investment if it ... 
Markets
How Risk Free Is The RiskFree Rate Of Return?
This rate is rarely questioned  unless the economy falls into disarray. 
Financial Advisor
RiskFree & 20% Return? More Like 100% Scam
An investment that promises a riskfree return of 20% is 100% likely to be a scam. 
Investing
Calculating the Equity Risk Premium
Equity risk premium is the excess expected return of a stock, or the stock market as a whole, over the riskfree rate. 
Managing Wealth
How Interest Rates Affect Property Values
Along with their impact on mortgages, interest rates affect capital flows, the supply and demand for capital, and an investorâ€™s required rate of return. 
Managing Wealth
How to Calculate Risk Premium
Think of a risk premium as a form of hazard pay for risky investments. 
Markets
How & Why Interest Rates Affect Futures
There are at least four factors that affect change in futures prices, including risk freeinterest rates, particularly in a noarbitrage environment. 
Managing Wealth
What Investors Should Know About Interest Rates
Understanding interest rates helps you answer the fundamental question of where to put your money. 
Managing Wealth
Understanding The Sharpe Ratio
This simple ratio will tell you how much that extra return is really worth.

How is it possible for a rate to be entirely riskfree?
Find out whether there really is such a thing as a riskfree rate of return, and learn why taking the idea of riskfree rates ... Read Answer >> 
How is the riskfree rate of interest used to calculate other types of interest rates ...
Learn how the riskfree rate is used to compare the yields on bonds, and understand how Tbills are used as a proxy for the ... Read Answer >> 
What is the correlation between equity risk premium and risk?
Learn about the relationship between the riskfree rate of return and the equity risk premium, and understand how the riskfree ... Read Answer >> 
How is the riskfree rate determined when calculating market risk premium?
Learn how the riskfree rate is used in the calculation of the market risk premium, and understand why Tbills provide the ... Read Answer >> 
What nations other than the U.S. have riskfree interest rates?
Find out which countries have riskfree rates of returns. This is typically the yield on a 3month note, and it can be negative ... Read Answer >> 
How accurate is the equity risk premium in evaluating a stock?
Learn about the drawbacks of using the equity risk premium to evaluate a stock, and understand how it is calculated using ... Read Answer >>