What Is the "Safest" Return You Can Earn?

The risk-free rate is the starting point for every discount rate. It represents what you earn with zero risk — the floor below which no return makes sense.

Risk-Free RateGovernment BondDiscount Rate

Live Result

0.02

ƒ: govt_bond_yield - expected_inflationraw: 0.0200000

ƒ(x)

Use variable names from the panel above (e.g. FV, r, n) — or type numbers directly: 10000 / (1 + 0.08)^10

govt_bond_yield% as decimal

10-year government bond nominal yield

govt_bond_yield = 0.045

expected_inflation% as decimal

Expected long-run inflation rate

expected_inflation = 0.025

💡 You can also enter values directly in the formula: 10000 / (1 + 0.08)^10

⬇ Export Calculation

Exports a plain .txt file with your expression, formula, all variable values, result, and educational notes — ready to paste into any report, Word doc, Notion, or Google Docs.

The exported file includes the formula in standard mathematical notation — you can paste it directly into Excel, Google Sheets, or back into FinanceSheep.

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Learn: What Is the "Safest" Return You Can Earn?

Estimating Discount Rates · Educational Guide

The Core Idea

Before you can measure how risky an investment is, you need a baseline: what return could you get with zero risk? That's the risk-free rate — the foundation of every valuation.

How It Works

Risk-free rate = return on an investment with no default risk and no reinvestment risk. In practice: long-term government bond yield of a stable country (US Treasury, German Bund). It anchors all discount rates.

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Real-World Example: US 10-year Treasury yield: 4.5%. Expected inflation: 2.5%. Real risk-free rate = 4.5% − 2.5% = 2%. This 2% is your real return for lending to the US government with zero risk.

What Is the "Safest" Return You Can Earn?

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