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What is the current risk free interest rate?

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27th Apr 2012 by saad - Bangladesh Specific

7%

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19th Nov 2009 by peter matthews

Whilst it is true to say that there is no such thing as "zero risk" when you invest or lend money to anybody, most people would accept that investing in securities issued by the US Government is as close to a zero risk investment as you can find. Unfortunately the yield currently available on 3 month US Government is also just about zero. If you look at longer term investments in US Treasuries, 1 year bonds yield around 0.25% and 10 year bonds yield just under 3.5%. You can also look at CDs issued by banks covered by FDIC insurance. Nobody has ever lost money when investing in accounts covered by this insurance. This could, therefore, also be regarded as "risk free" investing. Interest rates will vary from bank to bank, but will be considerably better than that offered by government securities.

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5th Nov 2009 by Gary

There is in reality no such thing as a risk free interest rate, so the answer would be there isn't a current risk free interest rate. But some choose to measure a risk free interest rate in a proxy sort of way, and so use a three-month T-Bill as that measurement. So whatever the 3-month T-bill interest rates are at that time, that's the way some answer the hypothetical question.

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