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.
August 2, 2024
