Opportunity cost and RFR: Difference between pages

Revision as of 18:33, 1 December 2018

Risk-Free Rate.

The abbreviation 'RFR' usually refers to risk-free benchmark interest rates, such as SONIA.

Also known as near risk-free rates, recognising that such rates are never entirely risk-free.

Theoretically risk free rates of investment return, for example in the Capital asset pricing model, are more often designated by 'Rf' or 'rf'.

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+Risk-Free Rate.
-The expected return that is foregone by investing in a project, rather than in the next best use of capital or other resources.
+The abbreviation 'RFR' usually refers to risk-free benchmark interest rates, such as SONIA.
-It is the opportunity cost of capital and other resources that is the relevant economic measure for financial decision making purposes.
+Also known as ''near'' risk-free rates, recognising that such rates are never entirely risk-free.
-Opportunity cost is an important and powerful concept in cash management.
+Theoretically risk free rates of ''investment'' return, for example in the Capital asset pricing model, are more often designated by 'Rf' or 'rf'.
-Examples of opportunity costs include leaving cash in a non-interest bearing bank account.
-The organisation loses the opportunity to pay down debt (and save interest) or to invest the cash elsewhere (and earn interest).
+==See also==
+*[[Capital asset pricing model]]
+*[[RFR WG]]
+*[[Risk-free rate of return]]
+*[[Risk-free rates]]
+*[[SONIA]]
+[[Category:Corporate_financial_management]]
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+[[Category:Financial_products_and_markets]]
-The same as 'opportunity loss'.
-== See also ==
-* [[Cost of capital]]
-* [[Float]]
-* [[Opportunity cost of capital]]
-* [[Opportunity loss]]
-* [[Production possibility curves]]
-* [[Supernormal profit]]
-* [[Value dating]]