Real Risk-Free Rate of Return

Real Risk-Free Rate of Return

The risk-free rate of return after taking inflation into account. For example, if the risk-free rate of return is 3% and the inflation rate is 2%, the real risk-free rate of return is 1%. Because the risk-free rate is low in the first place, the real return can sometimes be negative, particularly in times of high inflation.
References in periodicals archive ?
where |Y.sub.t~ is the yield for the bill, and |ARIMAEr.sub.f,t~ is the time-series estimate of the expected real risk-free rate of return during period t.