33.

Suppose 1-year T-bills currently yield 7.90% and the future inflation rate is expected to be constant at 2.30% per year. What is the real risk-free rate of return, r*? The cross-product term should be considered, i.e., if averaging is required, use the geometric average. (Round your final answer to 2 decimal places.)

a. 5.10%

b. 7.72%

c. 5.47%

d. 5.60%

e. 10.38%