Investor Glossary-risk-free rate of returnInvestor Glossary-risk-free rate of returnInvestor Glossary-risk-free rate of returnInvestor Glossary-risk-free rate of returnInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Risk-free Rate Of Return

The HTML to link to this page
 

The return an investor can expect to receive on a totally risk-free asset is referred to as as risk-free rate of return. The risk-free rate of return exists in theory but not in practice because every investment involves some element of risk. The yield on three-month US Treasury Bills is often used as a proxy for the risk-free rate of return since treasury bills are generally considered the least risky investment. The risk-free rate of return plays an important role in modern portfolio theory which argues that the risk-free rate of return is the minimum return investors will accept on their investment. As compensation for higher risk, investors demand the risk-free rate of return plus a premium on riskier assets.



Rate this risk-free rate of return definition...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.


Popular Terms: ex-dividend, in escrow, 1031 exchange, inflation, 1035 exchange, wholly-owned subsidiary, minority interest, debt service coverage, balance sheet, cancelled check, required rate of return, covered put, option premium, stock market close, deferred tax, Zero Cost Collar, Key Rate Duration, ex-dividend date, average price per share, VIX, LIBOR, quality assurance, class C shares, FICO score, current ratio, implied volatility, stock split, 401a, reverse mortgage, limit order, command economy, real GDP, 144a, APR, annual return, dividends payable, open position, per diem, phantom income, margin rate, FTSE, labor relations, deferred revenue, EBITDA, risk management, retained earnings, liquidity ratio, diluted share, irrevocable trust


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Home | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2016 Investor Glossary - All rights reserved - Terms of Use