Risk-Free Rate
Also called: riskless rate, risk free rate of return
The risk-free rate is the return available with no credit risk, proxied in practice by short-term government debt in the same currency. It is the anchor of nearly every valuation: discount rates, CAPM, option prices and hurdle rates all start from it and add compensation for risk. Nothing is truly risk-free — government bonds still carry inflation and reinvestment risk — so the term means default-free, not loss-proof.
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