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Risk-Free Interest Rate

   Also found in: Wikipedia 0.01 sec.
Risk-Free Interest Rate
Describes return available to an investor in a security somehow guaranteed to produce that return. The risk-free interest rate compensataes the investor for the temporary sacrifice of consumption.

Risk-Free Return
The return on any investment with such low risk that the risk is considered to not exist. A common example of a risk-free return is the return on a U.S. Treasury security. The risk-free return exists in order to compensate the investor for the temporary tying up of his/her capital, even though it is not put at risk. See also: Capital Allocation Line, riskless investment.


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To take advantage of the collective wisdom of the market in forecasting rate decisions, we will use a combination of long and short-term, risk-free interest rate assets to determine the cumulative movement the Reserve Bank of Australia (RBA) will make over the coming 12 months.
It is also assumed, in common with Kruijt, that the average future inflation rate is equal to the average rental growth rate, so that NIY= risk-free interest rate + property net risk premium - expected growth, (23) or NIY= RFR + NRP - g.
The risk-free interest rate is usually based on one of the government treasuries (e.
 
 
 
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