Ch.10 · Benchmarks and Performance Evaluation · medium
What is the 'risk-free rate' used in risk-adjusted return calculations and what is commonly used as a proxy in India?
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EXPLANATION
The risk-free rate represents the return on a theoretically risk-free investment. In India, the 91-day Treasury Bill yield or the RBI repo rate is commonly used as a proxy. It represents the minimum return an investor should expect — any investment must compensate for this opportunity cost plus additional return for the risk taken.
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