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. ... 
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 ... 
Capital Asset Pricing Model  CAPM
A model that describes the relationship between risk and expected ... 
OptionAdjusted Spread (OAS)
A measurement of the spread of a fixedincome security and the ... 
Cost Of Equity
In financial theory, the return that stockholders require for ...

Investing
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 ... 
Investing
How Risk Free Is The RiskFree Rate Of Return?
This rate is rarely questioned  unless the economy falls into disarray. 
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 investor’s required rate of return. 
Investing
What Investors Should Know About Interest Rates
Understanding interest rates helps you answer the fundamental question of where to put your money. 
Investing
What's the OptionAdjusted Spread?
The optionadjusted spread, or OAS, measures a fixedincome security rate’s spread and the riskfree rate of return that’s adjusted to account for an embedded option. 
Investing
Understanding The Sharpe Ratio
This simple ratio will tell you how much that extra return is really worth. 
Investing
Understanding RiskReturn Tradeoff
The essence of riskreturn tradeoff is embodied in the common phrase “no risk, no reward.” 
Investing
Explaining the Capital Market Line
The capital market line (CML) depicts the level of additional return above the riskfree rate for each change in the level of risk. 
Investing
Mitigating Downside With The Sortino Ratio
Differentiate between good and bad volatility with the Sortino Ratio.

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 >> 
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 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 >> 
Is the market risk premium the same for stocks and bonds?
Take a look at historical equity risk premium and credit spreads in the United States, which suggest that equities carry ... Read Answer >> 
How do I calculate the cost of equity using Excel?
Learn how to calculate the cost of equity in Microsoft Excel using the capital asset pricing model, or CAPM, including brief ... Read Answer >> 
How is the expected market return determined when calculating market risk premium?
Find out how the expected market return rate is determined when calculating market risk premium and how these figures are ... Read Answer >>