26.

Suppose the rate of retum on a 10-year "T-bond is 7.50%, the expected average rate of inflation over the next 10 years is 1.60%, the MRP on a 10-year T-bond is 0.90%, no MRP is required on a TIPS, and no liquidity premium is required on any Treasury security. Given this information, what should the yield be on a 10-year TIPS? Disregard cross-product terms, ie, if averaging is required, use the arithmetic average e a. 6,60% b. 5.00% O 06.50 @ 0,4.925 0.5.90