Risk Free Rate (RFR): It is a Rate that reflects the average interest rates on loans for the previous night. It is applied as an alternative to the LIBOR Rate

Abstract

The difference between the Risk-Free Rate and the LIBOR Rate is that the LIBOR Rate is used to determine the return at the beginning of the financing period, of which payment shall be at the end of the period. However, the Risk-Free Rate is used to determine the return paid at the end of the period, or every day, of which payment shall be at the end of the period.

This Research concluded that be permissible to achieve profitability with a variable profit based on the Risk Free Rate; without the need to search for alternatives, due to the lack of interest, as the interest is the excess amount over the fixed due debt, which shall be only conceivable as to the determined amount. It is the ignorance affecting the validity of the Contract which leads to dispute, and the price is determined herein the future in a way that does not lead to dispute. Whereas there is a need for such a transaction, one of the conditions of ignorance is that there shall be no need for it thereof.

This Research also concluded that it shall be permissible to lease at a variable rent based on the Risk-Free Rate without the need to search for alternatives because it is not required for the validity of the Lease at a variable rent to determine the rent for each period at its beginning.