What is used in the USA to represent the risk-free rate?

Solutions

Expert Solution

Risk free rate of the return the return that investors expects if he not going to take any risk

Generally risk free assets are backed by the governments . So they are called as risk free assests.

Most often 3 months US treasury bill is oftern used as a risk free rate for investors

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

a). What is the market risk premium if the risk free rate is 5% and the...

a). What is the market risk premium if the risk free rate is 5% and the expected market return is given as follows? State of nature Probability Return Boom 20% 30% Average 70% 15% Recession 10% 5% b). A firm is evaluating two projects that are mutually exclusive with initial investments and cash flows as follows: Project A Project B Initial Investment End-of-Year Cash Flows Initial Investment End-of-Year Cash Flows RM40,000 RM 20,000 RM 90,000 RM 40,000 RM 20,000 RM...

What is the standard deviation of the risk-free rate?

You expect the following set of possible outcomes for a stock:OutcomeProbabilityEnding Stock PriceHolding Period Return(Percent)Risk-free rate(Percent)Good35%$12044.54Neutral30%$100142Bad35%$70-16.5.5What is the standard deviation of the risk-free rate? Please enter your answer in percent rounded to the nearest basis point.

• The risk-free rate in the US is 5% and the UK risk-free rate is 8%....

• The risk-free rate in the US is 5% and the UK risk-free rate is 8%. The spot quote is $1.80/£ while the one year forward quote is $1.78/£. You can borrow either $1,000,000 or £555,556. According to IRP, is the forward quote correct? If not, what should it be? If the forward quote is not correct, lay out the steps to implement an arbitrage. The annualized US risk-free rate is 8% and the Germany risk-free rate is 5%. Assume...

The risk-free rate in the US is 5% and the UK risk-free rate is 8%. The...

The risk-free rate in the US is 5% and the UK risk-free rate is 8%. The spot quote is $1.80/£ while the one year forward quote is $1.78/£. You can borrow either $1,000,000 or £555,556. According to IRP, is the forward quote correct? If not, what should it be? If the forward quote is not correct, lay out the steps to implement an arbitrage.

The annualized risk-free rate in the eurozone is 3% and the annualized UK risk-free rate is...

The annualized risk-free rate in the eurozone is 3% and the annualized UK risk-free rate is 5%. The spot quote is €1.20/£ while the one year forward quote is €1.25/£. You can borrow either €1,000,000 or £833,333.33. According to interest rate parity, is the forward quote correct? If not, what should it be? If the forward quote is not correct, how much money would you profit if you implemented the proper arbitrage? Multiple Choice: Forward rate should be €1.2643/£; arbitrage...

the annualized risk-free rate in the eurozone is 5% and the annualized UK risk-free rate is...

the annualized risk-free rate in the eurozone is 5% and the annualized UK risk-free rate is 3%. The spot quote is €1.18/£ while the one year forward quote is €1.25/£. You can borrow either €1,000,000 or £847,457.6. According to interest rate parity, is the forward quote correct? If not, what should it be? If the forward quote is not correct, how much money would you profit if you implemented the proper arbitrage? Multiple Choice Forward rate should be €1.2643/£; arbitrage...

The annualized US risk-free rate is 8% and the Germany risk-free rate is 5%. Assume that...

The annualized US risk-free rate is 8% and the Germany risk-free rate is 5%. Assume that any period rates less than a year can be interpolated (i.e. if you invested for 6 months then you would receive 4% in the US). The spot quote is €0.80/$ while the 3-month forward quote is €0.7994/$. You can borrow either $1,000,000 or €800,000. According to IRP, is the forward quote correct? If not, what should it be? If the forward quote is not...

The annualized US risk-free rate is 8% and the Germany risk-free rate is 5%. Assume that...

The annualized US risk-free rate is 8% and the Germany risk-free rate is 5%. Assume that any period rates less than a year can be interpolated (i.e. if you invested for 6 months then you would receive 4% in the US). The spot quote is €0.80/$ while the 3-month forward quote is €0.7994/$.You can borrow either $1,000,000 or €800,000. According to IRP, is the forward quote correct? If not, what should it be? If the forward quote is not correct,...

The risk-free rate is 2% and the market risk premium is 5%. What is the required...

The risk-free rate is 2% and the market risk premium is 5%. What is the required return on a portfolio of stocks A and B given the information below: Stock Weight Beta A 30% 1.0 B 70% 0.5

Assume that the risk-free rate is 3.5% and the market risk premium is 3%. What is...

Assume that the risk-free rate is 3.5% and the market risk premium is 3%. What is the required return for the overall stock market? Round your answer to two decimal places. % What is the required rate of return on a stock with a beta of 1.9? Round your answer to two decimal places. %

Subjects