Suppose the rate of return on a 10-year T-bond is currently 6.10% and that on a 10-year Treasury Inflation Protected Security (TIP) is 2.10%. Suppose further that the maturity risk premium on a 10-year T-bond is 1.9%, 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:

a. 2.10%

b. 1.90%

c. 2.20%

d. 2.00%

e. 1.00%