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  • May 13, 2021
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Risk-Free Rate

The interest rate that would exist on a riskless investment/ security, given that expected inflation is zero. Such a rate doesn’t exist in real life, and the nearest estimation is the interest rate on short term securities issued by credit-worthy governments in an inflation-free setting. In real world, the real risk-free rate is said to range between 1% and 5%, or more depending on the risk magnitude in the broader environment.


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