The rate of return on which one of the following is used as the risk-free rate?

Question

Quizplus · Accepted Answer

The risk-free rate is typically considered to be the rate of return on a U.S. Treasury bill, as they are backed by the U.S. government and are considered to have virtually no risk of default. Long-term government bonds or corporate bonds are not risk-free, as they carry some level of risk of default or interest rate fluctuations. Inflation as measured by the Consumer Price Index is not a rate of return, but rather a measure of the change in prices over time. Large-company stocks are considered to be riskier than U.S. Treasury bills, as they are subject to market fluctuations and are not guaranteed by the government.

The Rate of Return on Which One of the Following