• Home
  • Knowledge base
  • Useful Forms
  • FAQ

The interest rate used to define the “risk-free” rate of return is the

Modified on: 2018/07/12

a. discount rate.

90-day Treasury bill rate.

five-year Treasury note rate.

federal funds rate.

Answers: b

The 90-day Treasury bill rate is used because there is no credit risk, and the maturity is so short that there is no liquidity or market risk. The five-year Treasury also has no credit risk, but if interest rates rise, the market value could decline.

Did you find it helpful?
Related Articles