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Please answer all questions using financial calculator and show steps how you solved it QUESTION 10 Suppose the rate of return on a 10-year T-bond

Please answer all questions using financial calculator and show steps how you solved it

QUESTION 10

Suppose the rate of return on a 10-year T-bond is 4.70%, the expected average rate of inflation over the next 10 years is 2.50%, the MRP on a 10-year T-bond is 1.25%, no MRP is required on a Treasury Inflation Protected Security (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, i.e., if averaging is required, use the arithmetic average.

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