Dear All
what is the risk free rate of return... and how to determine actually i want to use it for the calculation of cost of equity.
thanx®ards
karan gandhi
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Risk free return
Replies (3)
generally the goverment bonds interest rate is considered as bench mark for risk free rate of return
Risk free rate of Return means :
The theoretical rate of return of an investment with zero risk. The risk-free rate represents the interest an investor would expect from an absolutely risk-free investment over a specified period of time.
This term is used oftenly while we are doing invstment related excercise. Now, in fact there is nothing like risk free. But to understand the term we can say that Government is better paymaster and the return which Govt. is offering on G-Sec or Govt. Bank interest rates that can be takn as Risk Free Interest Rate for Calculation purposes.
Rgds,
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