Suppose the real risk$-$free rate is $3\mathrm{.}50\%$ and the future rate of inflation is expected to be constant at $6\mathrm{.}40\%.$ What rate of return would you expect on a $1-$year Treasury security, assuming the pure expectations theory is valid? Disregard cross$-$product terms, i$.$e$.,$ if averaging is required, use the arithmetic average.

a$.6\mathrm{.}70\%$

b$.9\mathrm{.}90\%$

c$.3\mathrm{.}50\%$

d$.4\mathrm{.}95\%$

e$.3\mathrm{.}72\%$