A 10-year Treasury bond currently yields 7%. The real risk-free rate, r*, is 3.1%. The maturity risk premium has been estimated to be 0.1%(t - 1), where t = the maturity of the bond. Inflation is expected to average 2.5% a year for each of the next five years. What is the expected average rate of inflation between years five and ten? Disregard cross-product terms, i.e., if averaging is required, use the arithmetic average.

a.3.0%

b.4.5%

c.2.5%

d.4.0%

e.3.5%