Risk-Free Interest Rate

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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.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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
References in periodicals archive ?
ENPNewswire-August 7, 2019--EIOPA publishes monthly technical information for Solvency II Relevant Risk Free Interest Rate Term Structures - end-July 2019
But though such effects, if they occur, may continue to push down the risk free interest rate, they will as I have said, also push down income and are therefore unlikely to improve sustainability.
Theta and rho give information about option sensitivity to time and changes in the risk free interest rate.
We changed, previously, our risk free interest rate for Egypt, from 13% to 11%, to account for the monetary loosening cycle that commenced in February 2009.
The equity price (eqp) can be written recursively as dependent on profit per unit of capital (prof) and the discounted value of next period's equity price, where the discount factor is made up of a real risk free interest rate (rr) and an equity premium (eprem) :
represents the domestic risk free interest rate, "[r.sub.f]"
Krauss and Ross (1982) argue that, in the context of their model, the risk free interest rate should be considered as a "real" or inflation adjusted rate if expected claim costs are set at current prices.
In particular, in the past the difference between returns on equity and risk free interest rates was too high.
HAROON ASKARI: A tighter monetary policy leads to an increase in the interest rate and at this rate the firm's future earnings are capitalized, and investors compare the earning with risk free interest rates this result in stock prices decline.

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