The risk-free rate of interest is equal to the real rate of interest plus a premium for inflation.

Question

Quizplus · Accepted Answer

The risk-free rate of interest is typically defined as the rate of return on a risk-free investment, such as a Treasury bond. This rate includes both the real rate of interest (which compensates the investor for the time value of money) and a premium for expected inflation. Therefore, the statement is true.

The Risk-Free Rate of Interest Is Equal to the Real