The interest rate that can be obtained by investing in financial instruments with no default risk is referred to as the risk-free interest rate. However, other types of risk could be carried by the financial instrument, e.g. market risk (market is the risk of changes in market interest rates), liquidity risk (liquid risk is the risk of being unable to sell the instrument for cash at short notice without significant costs), etc.
Risk-Free Assets
Though it is true that a truly risk-free asset exists only in theory, while in practice short-dated government bonds of the currency in demand is used by most professionals and academics. Usually US Treasury bills are used for USD investments, while German government bills or Euribor rates are a common choice for EUR investments. During the 20th century the mean real interest rate of US treasury bills was 0.9% p.a. (Due to hyperinflation during the 1920s corresponding figures for Germany are inapplicable.)
