Average risk free investment rate in Germany 2015-2023

Up until 2018, the average risk-free rate in Germany remained relatively stable at approximately 1.4 percent. The risk-free rate is a theoretical rate of return of an investment with zero risk. This rate represents the minimum interest an investor would expect from a risk-free investment over a period. It is important to remember that the risk-free rate is only theoretical as all investments carry even the smallest of risks. As of 2023, the risk-free rate in Germany was 2.5 percent.

Risk free rates in Europe

A higher risk-free rate illustrates that even with a so-called "zero risk" investment, investors would want a higher return because of the countries associated investment risks. In Europe, Ukraine and Turkey were among the countries with relatively higher average risk-free rates in 2023 compared to other European countries. The majority of European countries have RF rates under three percent in 2023.

Market risk premiums

Risk free rates reflect market risk premiums (MRP) with Germany displaying low MRP compared to other European countries. Split into three categories (required, historical, expected), market risk premiums measure the rate of return investors expect on an investment over the risk that investment holds. In Europe, average market risk premiums (MRP) sit between five and ten percent. During the last ten years, Germany has seen slight increase in market risk premiums.