Detailed Explanation:Treasury bills (T-bills) are short-term government debt instruments with minimal risk of default. Their returns are often used as a proxy for therisk-free ratein financial analysis, as they represent the theoretical return on an investment with zero credit risk. The risk-free rate is critical for discounting cash flows and comparing returns on various investments.
Other options:
* A. Bank prime rateis the interest rate commercial banks charge their most creditworthy customers.
* B. Inflation rateis unrelated to the direct return on T-bills, though it impacts real returns.
* D. Federal funds rateapplies in the U.S. to interbank lending, not directly to T-bills.
* CSC Volume 1 (2023 Edition): Chapter on the financial markets, inflation, and trade settlement.
* CSC Volume 2 (2024 Edition): Sections on portfolio analysis and risk-free securities.
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