Risk-free interest rate calculation?

Risk-free interest rate calculation?
The risk free rate has to meet two criteria:

(1) there can be no risk of default associated with its cash flows and

(2) there can be no reinvestment risk

Using these conditions, the appropriate risk free rate to use to obtain expected returns should
be a no default (usually government) zero coupon bond that is matched up to when the cash flow or flows that are being discounted occur.

But it is usually appropriate to equate the payback duration of the risk free asset to the duration of the cash flows of a project/investment being compared, usually U.S. government bond (10 year) rates as risk free rates.


Pre-calculated risk-free rates based on the Svensson method for USD and EUR can be found at www.quaestorial.com
There is also audit-proof documentation available for each rate.