What Is Meant by the Real Risk-Free Rate of Interest

question 29

Multiple Choice

What is meant by the real risk-free rate of interest?

• A) The opportunity cost of foregoing consumption, representing the rate that must be offered to individuals to persuade them to save rather than consume.
• B) The rate actually used in the market, not in textbooks.
• C) The rate quoted on short-term Treasury bills.
• D) The nominal risk-free interest rate, less the expected inflation.

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Definitions:

Amino Acids

Organic compounds that serve as the building blocks of proteins, containing both an amino group and a carboxyl group.

Three-Letter Sequences

In genetics, sequences of three nucleotides (triplets) in DNA or RNA that code for specific amino acids, the building blocks of proteins.

mRNA

Messenger RNA, a form of RNA responsible for transporting genetic instructions from DNA to the ribosome, the site of protein synthesis.

tRNA

Transfer RNA; a type of RNA that helps decode a messenger RNA (mRNA) sequence into a protein during protein synthesis.