- Risk-Free Return
- The theoretical rate of return attributed to an investment with zero risk. The risk-free rate represents the interest on an investor's money that he or she would expect from an absolutely risk-free investment over a specified period of time.
In theory, the risk-free rate is the minimum return an investor should expect for any investment, as any amount of risk would not be tolerated unless the expected rate of return was greater than the risk-free rate.

In practice, however, the risk-free rate does not technically exist; even the safest investments carry a very small amount of risk. Thus, investors commonly use the interest rate on a three-month U.S. Treasury bill as a proxy for the risk-free rate because short-term government-issued securities have virtually zero risk of default.

*Investment dictionary.
Academic.
2012.*

### Look at other dictionaries:

**risk-free return**— The interest rate on the lowest risk investment, usually a U.S. government security, for that period of time. ► Investors compare the yield premium over the risk free return versus the risk of the investment … American business jargon**Risk adjusted return on capital**— (RAROC) is a risk based profitability measurement framework for analysing risk adjusted financial performance and providing a consistent view of profitability across businesses. The concept was developed by Bankers Trust in the late 1970s. Note,… … Wikipedia**Risk-Free Rate Of Return**— The theoretical rate of return of an investment with zero risk. The risk free rate represents the interest an investor would expect from an absolutely risk free investment over a specified period of time. In theory, the risk free rate is the… … Investment dictionary**Risk-Free Asset**— An asset which has a certain future return. Treasuries (especially T bills) are considered to be risk free because they are backed by the U.S. government. Because they are so safe, the return on risk free assets is very close to the current… … Investment dictionary**Risk-Adjusted Return On Capital - RAROC**— An adjustment to the return on an investment that accounts for the element of risk. Risk adjusted return on capital (RAROC) gives decision makers the ability to compare the returns on several different projects with varying risk levels. RAROC was … Investment dictionary**risk-free rate of return**— The rate of return on an investment that has no risk. The return on US and UK Treasury bills is often regarded as a very close approximation to this rate. The risk free rate is an important concept in the capital asset pricing model … Accounting dictionary**risk-free rate**— The rate of return on an investment that has no risk. The return on US and UK Treasury bills is often regarded as a very close approximation to this rate. The risk free rate is an important concept in the capital asset pricing model … Big dictionary of business and management**risk-free interest rate**— Describes return available to an investor in a security somehow guaranteed to produce that return. The risk free interest rate compensate s the investor for the temporary sacrifice of consumption. Bloomberg Financial Dictionary … Financial and business terms**Risk-free asset**— An asset whose future return is known today with certainty. The New York Times Financial Glossary … Financial and business terms**risk-free asset**— also: riskless asset An asset whose future normal return is known today with certainty. Bloomberg Financial Dictionary … Financial and business terms