riskless investment

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Riskless Investment

An investment where the return is known with certainty. The certainty generally comes from a supreme amount of confidence in the issuer of the investment; for example, Treasury securities are considered riskless investments because the United States government is considered the best possible issuer. Critics contend that there is no such thing as a riskless investment because, in theory, even the US government could default. However, riskless investments have such a low level of risk that it may be ignored. Riskless investments usually have a low rate of return and, as a result, are exposed to inflation risk.

riskless investment

An investment with a certain rate of return and no chance of default. Although various investments (for example, savings accounts and certificates of deposit at insured institutions) meet these requirements, a Treasury bill is the most common example of a riskless investment.
References in periodicals archive ?
Economists have long appreciated that employees should logically and rationally prefer a DC pension plan that allows them to make investment decisions to one that forces them to earn riskless returns on riskless investments.
Practitioners have a choice of using either an historical estimate of the premium earned by equities over riskless investments, or somehow looking forward to estimate this differential.
Risk adjusted rates of return are estimated to be less than 100 basis points above the risk-free rate for all NCREIF return series except the Pacific Northwest, which is 150 basis points above the benchmark riskless investment.
The most common approach to estimating the market risk premium is to estimate the historical premium earned by risky investments (stocks) over riskless investments (government bonds).
There is a positive relationship between four of these variables and the call option's value, ceteris paribus: the underlying stock's price, the interest rate on riskless investments, the option's time to expiration (or maturity), and the volatility of the underlying stock's price.
By eliminating targeted tax incentives for savings and investment, that act eliminated distinctions on income from risk and riskless investments.