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Adams Inc. recently borrowed money for one year at 9%. The pure rate is 3%, and Adams's financial condition warrants a default risk premium of
Adams Inc. recently borrowed money for one year at 9%. The pure rate is 3%, and Adams's financial condition warrants a default risk premium of 2.5% and a liquidity risk premium of 1.4%. There is little or no maturity risk in one-year loans. What inflation rate do lenders expect next year? Round your answer to one decimal place.
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