The ________ rate of interest is typically the required rate of return on a three-month U.S. Treasury bill.
A) nominal
B) real
C) risk-free
D) premium

Question

Quizplus · Accepted Answer

The risk-free rate of interest is typically the required rate of return on a three-month U.S. Treasury bill. This is because the U.S. Treasury is considered to have virtually no risk of default, so the return on a three-month Treasury bill is considered to be a risk-free investment. The nominal rate of interest includes the risk-free rate plus an additional premium for inflation, while the real rate of interest adjusts for inflation.

The ________ Rate of Interest Is Typically the Required Rate