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 ?
Apart from making it easy for you to start investing, this FD also offers inflation-beating and risk-free returns. Take a look at the returns you get when you invest here.
Private sector complains that banks do not extend loans at cheaper rate as they find it easy to get low but risk-free returns on their investments in the government papers.
Don't be rushed into making a decision and be wary of promises of impressive, risk-free returns on investments.
The decision will push capital owners to deposit their money in banks and get high risk-free returns instead of investing in higher risk options, pointed out Abdel-Hakam.
Oil will remain in tanks only as long as the market is in steep contango, affording holders the risk-free returns they can achieve by selling futures at a higher price than their cost.
Small savings schemes are popular among retail investors as they offer risk-free returns and tax benefits.
According to theory, higher expected foreign risk-free returns and foreign currency risk both increase foreign yields, but have opposing effects on the value of the foreign currency.
The SEC "asserted that the scheme falsely promised exponential, risk-free returns to investors from a venture that purportedly sold Internet-based children's educational courses," White said, but "our complaint charged that, in reality, the firm had no sales and no apparent source of revenue other than money received from new investors."
Local banks remained profitable since the government emerged as the sole client providing risk-free returns despite global financial crisis began in 2007 that inflicted the banking of the entire world.
He set up the investment sham in Majorca in 2001, duping people into handing over their pensions and savings with the lure of fast, risk-free returns, while he spent much of their money on his high-rolling.
(83) The overarching point of this line of literature is that the income tax only reaches risk-free returns to capital and nothing more.
Given the difference in cost of capital between large buyers and small suppliers, such acceleration is of mutual benefit: The suppliers receive payment earlier, while large buying organizations benefit from double-digit risk-free returns through additional discounts.