The risk-free rate of return (RF)equals:
A)0.0%.
B)the rate on the bonds of financially sound corporations.
C)the average of the last 3 years' inflation rate.
D)the return on Treasury securities.

Question

Quizplus · Accepted Answer

The risk-free rate of return is the return an investor can get from an investment without risking any loss. The return on Treasury securities is often used as a proxy for the risk-free rate because they are backed by the full faith and credit of the US government, and are considered to have virtually no default risk. Therefore, the best option among the given choices is D.

The Risk-Free Rate of Return (RF)equals