A typical measure for the risk-free rate of return is the
A) U.S. Treasury bill rate.
B) prime lending rate.
C) money-market rate.
D) short-term AAA-rated bond rate.

Question

Quizplus · Accepted Answer

The U.S. Treasury bill rate is typically considered the best measure for the risk-free rate of return as it represents the interest rate on short-term U.S. government debt, which is considered to have virtually no risk of default. The other choices, such as the prime lending rate, money-market rate, and short-term AAA-rated bond rate, all involve some degree of credit risk and therefore do not represent a truly risk-free rate of return.

A Typical Measure for the Risk-Free Rate of Return Is