Hi Vitaly,

Thank you for your comments, assumption, and for sharing your point of view.

I meant it when I said, "Therefore the risk-free rate of return does exist, and it is always zero." I did not mean to say "doesn't" per your assumption.

We will have to agree to disagree. Here's why:

1) If return is the reward for risk - an intelligent framework - then how can there be a notion of a "risk-free rate of return?" Or a return for no risk? The name "risk-free rate of return" violates the principle it names. That is somewhat like "the deathless execution method." Also, the risk-free rate cannot be negative because then it offers a return to those who might short a financial asset that serves as a proxy.

2) My post above is decoupling the philosophy of "risk-free rate of return" from any specific instrument. By replying as you did with "default risk premium" you are pre-supposing that the only way to philosophically understand the "risk-free rate of return" is via an interest rate framework.

3) You reiterate that "the consumption of the capital has been deferred [and that] is what drives the risk free rate." This is oxymoronic; see #1 above.

With smiles,

Jason