Risk-Free Rate
The return on an investment with effectively zero credit risk. In US-dollar valuation models, conventionally the interest rate on 10-year US Treasury bonds (currently around 4.5%). Anchors the bottom of the required-return ladder: every other rate in finance — corporate bond yields, mortgage rates, the cost of equity via CAPM — is built up from the risk-free rate plus a spread for additional risk. When the Fed moves policy rates, the risk-free rate shifts within hours, and every other discount rate in the economy follows.
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Related terms
Absorption Rate · AFFO per Share · Allowed Return on Equity · Alternative Investments · Anchor Tenant · Assets Under Management
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