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    Question

    Which among the below can best describe the Interest on

    government bonds?
    A Risk premium Correct Answer Incorrect Answer
    B Market rate of return Correct Answer Incorrect Answer
    C Market price Correct Answer Incorrect Answer
    D Risk free rate Correct Answer Incorrect Answer
    E Beta Correct Answer Incorrect Answer

    Solution

    The risk-free rate is the theoretical rate of return on an investment that has zero risk of loss. In reality, no investment is entirely risk-free, but government bonds are often considered to be the closest thing to a risk-free investment because they are backed by the government, which is unlikely to default on its debt.

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