risk-free rate


Risk-free rate

The rate earned on a riskless asset.

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.

risk-free rate

An interest rate on the safest investments, which would generally be short-term federal government obligations or savings accounts in amounts less than the FDIC insurance limits.