Question

1 year treasury investment yield 4%; while a high tech comonn stock investment yeilds 25%. the risk free rate of return is:______A. 0%B. 4%C. 21%D. 25%

Answer 1

Answer:

B. 4%

Explanation:

The risk free return is equal to the one year treasury investment yield because the treasury investment is a government bond and the people have a guarantee by the government that they will be paid what they are owed, thus a 1 year treasury investment yield is often looked at as a risk free rate of return. In this question the one year treasury yield is 4% so the risk free rate of return is also 4%.