A good proxy for the risk-free interest rate is the interest rate on a:
A)loan to the U.S. government.
B)loan to a member of the public who has a good credit rating.
C)corporate bond.
D)junk bond.

Question

Quizplus · Accepted Answer

The risk-free interest rate is generally considered to be the yield on U.S. Treasury securities, which are viewed as risk-free since they are backed by the full faith and credit of the U.S. government. Choices B, C, and D are all corporate debt instruments which carry some degree of credit risk and are therefore not risk-free.

A Good Proxy for the Risk-Free Interest Rate Is the Interest