Business, 13.01.2021 17:40, afrimart1

Suppose the real risk-free rate is 3.00%, the average expected future inflation rate is 5.90%, and a maturity risk premium of 0.10% per year to maturity applies, i. e., MRP = 0.10%(t), where t is the number of years to maturity. What rate of return would you expect on a 1-year Treasury security, assuming the pure expectations theory is NOT valid? Disregard cross-product terms, i. e., if averaging is required, use the arithmetic average. a. 10.35% b. 7.29% c. 8.91% d. 9.00% e. 9.27%

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Suppose the real risk-free rate is 3.00%, the average expected future inflation rate is 5.90%, and a...