(Real interest rates: approximation method) The CFO of your firm has asked you for an approximate answer to this question: What was the increase in real purchasing power associated with both 3-month Treasury bills and 30-year Treasury bonds? Assume that the current 3-month Treasury bill rate is 5.02 percent, the 30-year Treasury bond rate is 8.25 percent, and the inflation rate is 2.26 percent. Also, the chief financial officer wants a short explanation should the 3-month real rate turn out to be less than the 30-year real rate.

The inferred real interest rate of Treasury bills is ____%. (Round to two decimal places.)

The inferred real interest rate of Treasury bonds is ____%.c(Round to two decimal places.)

Should the 3-month real interest rate turn out to be less than the 30-year real interest rate?(Select the best choice below.)

A. Yes, the 30-year real interest rate should exceed the 3-month real interest rate because the two securities are sold in different markets.

B. Yes, the 30-year real interest rate should exceed the 3-month real interest rate because inflation only affects the long-term security.

C. Yes, the 30-year real interest rate should exceed the 3-month real interest rate because the goverment demands lower rates for lending short term.

D. Yes, the 30-year real interest rate should exceed the 3-month real interest rate because of the maturity premium demanded by investors.