What is considered to be the best measure of the risk-free interest rate?
A) the rate of return on a corporate bond index fund
B) the rate of return on a corporate stock index fund
C) the rate of return on the Standard & Poor's 500
D) the rate of return on short-term U.S. government bonds

Question

Quizplus · Accepted Answer

The risk-free interest rate is generally considered to be the rate of return on short-term U.S. government bonds, as these are typically considered the safest investment option with the lowest risk of default. Corporate bonds and stocks are riskier investment options and are therefore not considered to be measures of the risk-free interest rate. The rate of return on the S&P 500 may be used as a measure of overall market performance, but it does not reflect the risk-free interest rate.

What Is Considered to Be the Best Measure of the Risk-Free