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.

RiskNeutral Measures
A theoretical measure of probability derived from the assumption ... 
Risk Premium
The return in excess of the riskfree rate of return that an ... 
Market Risk Premium
The difference between the expected return on a market portfolio ... 
ZeroBeta Portfolio
A portfolio constructed to have zero systematic risk or, in other ... 
Capital Asset Pricing Model  CAPM
A model that describes the relationship between risk and expected ... 
Fiduciary Call
A cost effective strategy designed to limit the costs associated ...

Investing
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 ... 
Personal Finance
RiskFree & 20% Return? More Like 100% Scam
An investment that promises a riskfree return of 20% is 100% likely to be a scam. 
Fundamental Analysis
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. 
Stock Analysis
Find The Right Discount Rate Amid Post2007 Risks
OIS discounting has become part of standard valuation techniques, in a market in which there is more uncertainty and less proxies for the riskfree rate. 
Investing Basics
More Ways to Evaluate Portfolio Performance
The Jensen measure is another tool investors use to include risk when measuring portfolio performance. 
Term
What's the OptionAdjusted Spread?
The optionadjusted spread, or OAS, measures a fixedincome security rateâ€™s spread and the riskfree rate of return thatâ€™s adjusted to account for an embedded option. 
Personal Finance
How Interest Rates Affect Property Values
When interest rates fall, real estate prices tend to increase. Why? Find out here. 
Investing Basics
How Interest Rates Affect The Stock Market
Whether you're buying lunch, a home or a stock, you're influenced by interest rates. 
Investing
Measure Your Portfolio's Performance
Learn three ratios that will help you evaluate your investment returns. 
Options & Futures
Why Forward Contracts Are The Foundation Of All Derivatives
This article expands on the complex structure of derivatives by explaining how an investor can assess interest rate parity and implement covered interest arbitrage by using a currency forward ...

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 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 is bond yield affected by monetary policy?
Learn about how bond yields are affected by monetary policy. Monetary policy determines the riskfree rate of return, which ... 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 >>