Suppose the real risk-free rate is 2.50% and the future rate of inflation is expected to be constant at 2.80%. 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.

Select one:

a.

5.30%

b.

4.82%

c.

6.25%

d.

5.35%

e.

6.15%