Risk-free Rate

The Risk-free Rate is the theoretical return on an investment with zero risk of financial loss, typically represented by the yield on short-term government securities such as Indian Treasury Bills or the 10-year Government of India bond. It serves as the baseline return against which all other investments are measured. In capital asset pricing models (CAPM), the risk-free rate is a key input for calculating the expected return of an asset—higher-risk investments must offer a return premium above this rate to attract investors.