From the course: Corporate Finance Foundations
Join today to access over 22,600 courses taught by industry experts or purchase this course individually.
Risk-free rate
- The risk-free rate is another component of the famous capital asset pricing model. The risk-free rate represents the return an investor would expect from an absolutely risk-free investment over a specific period of time. The risk-free rate is useful in helping a potential investor compute how much return to expect for a given level of risk. In other words, for an investment option bearing no risk, there is an expected rate of return. The risk-free rate. For a given level of risk, how much return over and above the risk-free rate would an investor require? Now the risk-free rate is the starting point in this computation. Adding more risk results in a higher expected rate of return. The risk-free rate, it's the baseline. Let's imagine that I've been asked to loan $1 to the most trustworthy organization on the earth. I don't know who that is, but let's just imagine them. The most trustworthy organization on Earth.…
Practice while you learn with exercise files
Download the files the instructor uses to teach the course. Follow along and learn by watching, listening and practicing.
Download courses and learn on the go
Watch courses on your mobile device without an internet connection. Download courses using your iOS or Android LinkedIn Learning app.