What was the risk free rate in 2010

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Social Science Research Network. June 16, Average market risk premium in the United States from to [Graph]. In Statista. I always thought of rf as investment in a domestic govt bond coz govt had the sovereign power to print money and therefore no risk.

Moody's rating of Ba2 for India is from an external perspective isn't it? That is pretty much it. The only problem with the CDS market is that there is some counter party risk but a CDS effectively insures you against default. While your assumption about domestic government bonds not defaulting because the government can print money seems reasonable, it flies in the face of history.

Governments have defaulted before and they will default again. Professor: understanding that risk free rates around the world are dicey now due to the amount of government debt, how does this issue impact implied equity risk premiums?

Thank you for your extraordinary work. Hi Proff, I am a new bee to your website and it seems phenomenal source of understanding. I had a query whether there is any data of historic World risk free rates. The reason I am looking for this data is I believe that there could be some corelation between risk free rate and market risk premium.

I would love to hear your thoughts on this. Looking forward to your guidance. Regards, Sanjeev. Hope this helps. If you want current riskfree rates in different currencies, you have to draw on a mix of data.

I start with the Financial Times and then move online to look for riskfree rates in other currencies. An interesting and instructive post. But I fear we are missing one important part of the equation: investors care about real returns, not nominal returns especially over the long term, when these two can diverge substantially.

So surely the "risk-free" rate is not just free of cashflow, default and reinvestment risk but also inflation risk. If governments print money to pay interest on their bonds then they fulfill the contract which is in nominal terms but the investor's real return is reduced by inflation. In contrast, equities have cashflow and default risk, but their cashflow is likely to increase roughly in line with economic growth or rather, the growth in the profit share of output and is thus to some extent insured against inflation.

Perhaps the true risk-free rate is the rate on inflation protected index-linked government bonds? Always assuming that the index is an honest reflection of inflation, of course There can never be a truly risk-free rate because even the safest investments carry a very small amount of risk. However, the interest rate on a three-month U.

Treasury bill is often used as the risk-free rate for U. This is a useful proxy because the market considers there to be virtually no chance of the U.

Absolute risk as defined by volatility can be easily quantified by common measures like standard deviation. Relative risk, when applied to investments, is usually represented by the relation of price fluctuation of an asset to an index or base. Since the risk-free asset used is so short-term, it is not applicable to either absolute or relative risk.

Default risk, which, in this case, is the risk that the U. Treasury bills T-bills are assumed to have zero default risk because they represent and are backed by the good faith of the U.

They are sold at a discount from par at a weekly auction in a competitive bidding process. Finally, they can be purchased by individuals directly from the government. Deutsche Bundesbank. Department of Treasury. Bank of Japan. Investing Essentials. Real Estate Investing. Portfolio Management. Your Privacy Rights. To change or withdraw your consent choices for Investopedia. At any time, you can update your settings through the "EU Privacy" link at the bottom of any page. These choices will be signaled globally to our partners and will not affect browsing data.

We and our partners process data to: Actively scan device characteristics for identification. I Accept Show Purposes. Your Money. Personal Finance. Your Practice. Popular Courses. Bonds Fixed Income Essentials. Key Takeaways The risk-free rate of return refers to the theoretical rate of return of an investment with zero risk.