In general, how do credit analysts determine the risk-free rate?
A) The average corporate yield
B) The yield on U.S. Government borrowings
C) The rate defined by the largest U.S. banks
D) The weighted-average corporate yield based on the preceding four quarters
E) None of the above

Question

Quizplus · Accepted Answer

The risk-free rate is typically determined by the yield on U.S. Government borrowings, such as Treasury bills, because these are considered free from default risk.

In General, How Do Credit Analysts Determine the Risk-Free Rate