Median inputs include a five per cent risk-free rate, seven per cent equity risk premium, 1.
What does RFR stand for?
RFR stands for Risk-Free Rate (investing)
This definition appears frequently and is found in the following Acronym Finder categories:
- Business, finance, etc.
See other definitions of RFR
Other Resources:
We have 65 other meanings of RFR in our Acronym Attic
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- Reef Fish Restoration Association (Florida)
- Regional Flood Risk Assessment (UK)
- Religious Freedom Restoration Act of 1993
- Request for Response Action (Minnesota Pollution Control Agency)
Samples in periodicals archive:
the desirability of any investment can be simply stated as the expected excess return over the risk-free rate less a term that represents the compensation that the investor requires to take the risk.
Long-term bond yields are very low, due to very low risk-free rates and moderate credit spreads.
In such a risk-neutral world the relevant discount rate is the risk-free rate of interest, and one can easily price any derivative securities.
Risk-free rate: If one assumes the risk-free rate to rise independently of the underlying security's price, it will increase the value of a call option and decrease the value of a put option.
The cost of equity is determined by a formula that includes: a risk-free rate of interest such as the London Interbank Offered Rate (LIBOR) or a one-year Treasury bill rate; a factor designed to account for market risk; this is referred to as the Ibbotson premia, (Google Ibbotson for an understanding of what this factor is and how it's derived); and the beta.
Zwecher argued that if stocks were a cinch to grow over the long run, then the cost of hedging against the risk of equities under performing the risk-free rate would decline over time.