what is a risk free interest rate 
a risk free interest rate is the theoretical rate of return on an investment carrying zero risk it is theoretical because no investment is entirely without risk although some come closer than others the bottom linethe merton model developed by economist robert c merton is a mathematical formula that assesses the structural credit risk of a company by modeling its equity as a call option on its assets it is often used by stock analysts and commercial loan officers to ascertain a corporation s likely risk of credit default 