Suppose the real risk-free rate is 3.00%, the average expected future inflation rate is 2.75%, and a maturity risk premium of 0.10% per year to maturity applies, i.e., MRP = 0.10%(t), where t is the 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.

a. 5.08%

b. 5.35%

c. 5.62%

d. 5.85%

e. 6.19%