The risk-free rate is:
A)usually approximated by interest rates on U.S.government debt.
B)the interest rate at which one would lend if there were no risk of default.
C)lower than any other interest rate.
D)All of these are true.

Question

Quizplus · Accepted Answer

The risk-free rate is usually approximated by interest rates on U.S government debt because it is assumed that the U.S government is unlikely to default on its debt. It is the interest rate at which one would lend if there were no risk of default. Therefore, it is lower than any other interest rate. Thus, all the given options are correct.

The Risk-Free Rate Is