Risk-Free Interest Rate(redirected from Risk free interest rate)
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.
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.
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