What is meant by the real risk-free rate of interest? It is the:
A) opportunity cost of foregoing consumption.
B) rate actually used in the market, not in textbooks.
C) rate quoted on long-term Treasury bonds.
D) the nominal risk-free rate, multiplied by 1 minus the marginal tax rate.

Question

Quizplus · Accepted Answer

The real risk-free rate of interest is the opportunity cost of foregoing consumption, representing the return on an investment with no risk of financial loss, adjusted for inflation.

What Is Meant by the Real Risk-Free Rate of Interest