Calculator · Cost of capital
Risk-free rate calculator
The default-free rate in the currency of your cash flows: a government bond yield less the default spread of the sovereign issuing it, with the inflation conversion of the US-dollar rate as a cross-check.
How the risk-free rate is built
A government bond is risk-free only if its issuer cannot default. Following Damodaran, the calculator starts from the yield of a long-term government bond in the currency of the cash flows and nets out the default spread of the sovereign that issues it: rating-based from Damodaran's country data, the sovereign CDS spread, or a figure you document. For US dollars that is the 10-year Treasury yield less the US default spread, netted out since the May 2025 downgrade to Aa1; for the euro and other shared currencies it is the bond of the highest-rated issuer, such as the German Bund.
For a local currency the result is shown beside Damodaran's other method, the US-dollar rate converted with the inflation differential, together with the inflation differential implied by the bonds. Checks flag a bond maturity that does not match the horizon of the cash flows (IVS 103 para A20.33(d)), a valuation date before the data update (IVS 102 para 10.04) and an implausible result. A real rate from inflation-indexed bonds is available for real cash flows. The project panel carries the rate into the cost of equity, cost of debt and WACC calculators.
Related: Beta calculator · Cost of equity calculator · WACC calculator · Model notes
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