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.

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.
References in periodicals archive ?
The bank's analysts, however, kept their "neutral" stance saying the risk-free interest rate of the company is still too low and the terminal value growth is 0.5% instead of zero percent.
We proxy the dividend yield with the inverse of a market-wide price-earnings ratio, and estimate the expost equity risk premium by subtracting the medium-term real risk-free interest rate and an estimate of the growth rate of potential output from this earnings-price ratio.
For this study, the determinant components are identified as the risk-free interest rate, inflation, and the risk premium.
expected return based on the risk-free interest rate of that particular
A pricing model estimates fair value using six factors--stock price, exercise price, volatility, risk-free interest rate, dividends and option term--that interact to create value.
The liability itself consists of future cash flows expected to be incurred in the exit and disposal activity, which are discounted at a credit-adjusted risk-free interest rate.
Most valuation techniques consider six standard inputs: current stock price, exercise price, option duration, risk-free interest rate, dividend yield and volatility These options are completely transferable, do not have vesting requirements and are not forfeitable.
We have used the yield on Norwegian government bonds with a maturity of 10 years as the risk-free interest rate.
Black and Scholes' improvements on the Boness model come in the form of a proof that the risk-free interest rate is the correct discount factor, and with the absence of assumptions regarding investor's risk preferences.
As regards savings and investment entities, now subject to a variety of regimes, it is proposed to move to a single regime based on the risk-free return method, whereby taxable income on all assets is calculated on the basis of the initial value of the assets and the real risk-free interest rate.
Only the time value of money in terms of a risk-free interest rate is incorporated into the discount rate in this approach.
The risk-free interest rate for the option's expected term;