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The interest rate theories that we studied are about the determination of the risk-free rate of interest, which is a component of all interest rates. What is the closest real-world approximation to this risk-free rate of return?
- The market interest rate on U.S. government bonds.
- The stock market return.
- The interest rate on high quality corporate bonds.
- The LIBOR rate.
- The interest rate on medium quality corporate bonds.