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Suppose the real risk - free rate is 2 . 5 0 % and the future rate of inflation is expected to be constant at

Suppose the real risk-free rate is 2.50% and the future rate of
inflation is expected to be constant at 3.80%. What rate of return
would you expect on a 5-year Treasury security, assuming the pure
expectations theory is valid? Disregard cross-product terms, i.e.,
if averaging is required, use the arithmetic average.6.30%5.80%7.25%5.17%7.18%

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