Suppose 1-year T-bills currently yield 7.00% and the future inflation rate is expected to be constant at 3.60% per year. What is the real risk-free rate of return, r*? Disregard any cross-product terms, i.e., if averaging is required, use the arithmetic average.

Group of answer choices

4.15%

3.20%

3.40%

2.99%

2.79%