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is this correct? Suppose the rate of return on a 10-year T-bond is currently 5.00% and that on a 10-year Treasury Inflation Protected Security (TIPS)
is this correct?
Suppose the rate of return on a 10-year T-bond is currently 5.00% and that on a 10-year Treasury Inflation Protected Security (TIPS) is 2.10%. Suppose further that the maturity risk premium on a 10-year T-bond is 1.0%, that no maturity risk premium is required on TIPS, and that no liquidity premiums are required on any T-bonds. Given this data, what is the expected rate of inflation over the next 10 years? Select one: O a. 1.80% b. 2.00% c. 2.10% d. 2.20% e. 1.90%
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