risk-free return

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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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

risk-free return

The annualized rate of return on a riskless investment. This is the rate against which other returns are measured. See also excess return.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

Risk-free return.

When you buy a US Treasury bill that matures in 13 weeks, you're making a risk-free investment in the sense that there's virtually no chance of losing your principal (since the bill is backed by the US government) and no threat from inflation (since the term is so short).

Your yield, or the amount you earn on that investment, is described as risk-free return. By subtracting the risk-free return from the return on an investment that has the potential to lose value, you can figure out the risk premium, which is one measure of the risk of choosing an investment other than the 13-week bill.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
Overall, the report said, GCC markets benefited from improved fiscal positions and relatively low risk free returns, possibly boosting the risk premium of equity holdings, in addition to improved fiscal positions.
The hike in policy rate also encouraged investors to make their way to fixed income securities like National Saving Certificates and other government securities which offer double digit risk free returns, from equities.
So if you see offers of risk free returns which are much higher than the international monetary bank base rate, you have to wonder how they provide such returns.
The portfolio at point F is independent of external variables, and therefore earns risk free returns [r.sub.f].
"With virtually risk free returns of seven per cent to more than ten per cent on Zopa on everything from pounds 10 to pounds 1 million, they would be silly to ignore peer-to-peer lending."
Expected market and risk free returns are a matter of judgment.

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