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= Suppose the real risk-free rate is 3.00%, the average expected future inflation rate is 4.90%, and a maturity risk premium of 0.10% per year

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= Suppose the real risk-free rate is 3.00%, the average expected future inflation rate is 4.90%, and a maturity risk premium of 0.10% per year to maturity applies, i.e., MRP = 0.10%(t), where t is the number of years to maturity. What rate of return would you expect on a 1-year Treasury security, assuming the pure expectations theory is NOT valid? Disregard cross-product terms, i.e., if averaging is required, use the arithmetic average. O 8.72% 09.04% O 6.00% O 8.00% O 6.56%

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