Question $5$

$1$ pts

The real risk$-$free rate is $2\mathrm{.}5$ percent. Inflation is expected to be $2\mathrm{.}5$ percent this year, $4$ percent next year, and $5$ percent thereafter. The maturity risk premium is estimated to be $0\mathrm{.}09(t-1)\%,$ where $t$ is the number of years to maturity. What is the yield on a $7-$year Treasury note?

$8\mathrm{.}04\%$

$7\mathrm{.}00\%$

$0\mathrm{.}63\%$

$5\mathrm{.}54\%$

$7\mathrm{.}54\%$