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risk-free rate

   Also found in: Acronyms, Wikipedia 0.01 sec.
Risk-free rate
The rate earned on a riskless asset.

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.

risk-free rate
An interest rate on the safest investments, which would generally be short-term federal government obligations or savings accounts in amounts less than the FDIC insurance limits.


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Then, if you add-in the specific of a next-to-nothing yield from the risk-free rate, readers will appreciate the background to the current pro-risk, pro-equity build-up.
For insurers' liabilities, this would mean recognizing at least two factors: first, changes in risk-free rate levels, and second, in the aftermath of a significant insurance-oriented tail event (insurer's version of the credit crisis), the additional costs associated with the need to carry more capital at a higher cost.
It includes a proposal that the present-day value of long-term pension liabilities should be derived by discounting using a risk-free rate instead of the rate on a high-quality corporate bond, as is done at present.
 
 
 
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