The risk-free rate of return, also known as the risk-free interest rate, is the return that an investor can expect from a theoretically risk-less investment. There is no such thing as a true risk-less investment as all investments entail risk even if it is considered negligible. In practice the risk-free rate of return is considered the yield of the 3 month T-Bill.
This rate of return is used as the base from which to judge the risk-reward profiles of different investments.
