Why is the rate of return on a risk free asset considered to represent the "time value of money"?
A) It represents the return for forgoing the use of our money without bearing risk.
B) It has an efficient risk premium when compared to other risk free investments.
C) The yield of the risk free investment increases proportionally with time.
D) The money from the return from your investment won't be created until the future.
E) It represents the minimum amount of time necessary to have the asset become risk free.

Question

Quizplus · Accepted Answer

The rate of return on a risk-free asset is considered to represent the "time value of money" because it represents the return for forgoing the use of our money without bearing risk, which is the fundamental concept of time value of money. It reflects the opportunity cost of investing in a risk-free asset instead of investing in some other asset that may have a higher expected return but also carries risk.

Why Is the Rate of Return on a Risk Free