The risk-free rate is usually approximated by interest rates on U.S. government debt, because the U.S. government:
A) is considered extremely unlikely to default.
B) sets all policy concerning interest rates.
C) has all loans protected by the Federal Reserve.
D) is the largest source of loanable funds in the economy.

Question

Quizplus · Accepted Answer

The U.S. government is considered extremely unlikely to default on its debt, making it a reliable benchmark for a risk-free rate.

The Risk-Free Rate Is Usually Approximated by Interest Rates on U.S