Question 5

Which of the following is NOT true of Risk-Free Rates?

a. It assumes zero risk and zero uncertainty, simply reflecting differences in timing

b. Higher preference to spend now will result in a higher risk-free rate.

c. The interest rate on a three-month U.S. Treasury bill is often used as the real risk-free rate for U.S.-based investors.

d. The formula of Real Risk-Free Rates(rf)= nominal risk-free rate inflation rate (inflation premium)