Question

Interest rates on securities issued by borrowers in the economy other than the government must reflect the different types and degrees of risk that investors in those securities must assume. T/F

The risk-free interest rate represents the return you can expect for taking no risk. T/F

Answer 1

Interest rates on securities issued by borrowers in the economy other than the government must reflect the different types and degrees of risk that investors in those securities must assume.

TRUE

The securities issued by entities other than the government assumes credit risk, liquidity risk, etc. The interst rates on those securities must reflect these risks assumed by the investors of those securities.

The risk-free interest rate represents the return you can expect for taking no risk.

TRUE

The risk-free interest rate is the rate on securities issued by the government and the investor has no risk in government securities.