ECONOMICS
RISK AND RETURN
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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True
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False
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Either A or B
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None of the above
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Detailed explanation-1: -The return that fully compensates for the risk of an investment is called the risk free rate of return.
Detailed explanation-2: -The risk-free rate of return is 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.
Detailed explanation-3: -The risk-free rate is the rate of return of an investment with no risk of loss. Most often, either the current Treasury bill, or T-bill, rate or long-term government bond yield are used as the risk-free rate. T-bills are considered nearly free of default risk because they are fully backed by the U.S. government.
Detailed explanation-4: -Risk-free return is the theoretical return attributed to an investment that provides a guaranteed return with zero risks. The risk-free rate of return represents the interest on an investor’s money that would be expected from an absolutely risk-free investment over a specified period of time.