Which of the following is true of the real risk-free rate of interest?
A. Most experts think that the real risk-free rate fluctuates in the range of 15 to 20 percent in the United States.
B. The real risk-free rate must include a component for the average inflation.
C. The real risk-free rate is the sum of nominal rate of interest and the average inflation rate.
D. It is easy to measure the real risk-free rate precisely.
E. It is the rate of interest that would exist on default-free U.S. Treasury securities if no inflation were expected in the future.
Answer: E
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