The nominal risk free rate of interest is a function of a Th

The nominal risk free rate of interest is a function of a. The real risk free rate and the investment\'s variance. b. The tax free rate plus the rate of inflation. c. The prime rate and the rate of inflation. d. The real risk free rate and the rate of inflation. e. The T-bill rate plus the inflation rate.

Solution

Correct option is > d. The real risk-free rate and the rate of inflation

Reason

Nominal risk-free rate is given by formula:

Nominal risk-free rate = (1+inflation rate) x (1+Real risk-free rate) -1