What is the Risk Free Rate?

The risk-free rate is the return you’d expect from an investment that’s considered completely safe, like a U.S. Treasury bond, where there’s almost no chance of losing your money.

It’s important to know the risk-free rate because it acts as a baseline for comparing all other investments-if you’re going to take on more risk, you should expect to earn more than the risk-free rate, and it’s used in many financial formulas to help figure out whether an investment’s extra returns are worth the extra risk.

You can find the risk-free rate by looking at the current yield on U.S. Treasury securities; many people use the 10-year Treasury yield, which is about 4.43% as of May 2025, while others might use the 3-month Treasury bill rate, which is also around 4.37%.