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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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Banking is an integral part of the modern financial system and plays an important role in an economy. It basically involves the so-called intermediation (e.g., ...
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