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Suppose the real risk-free rate is 3.00%, the average expected future inflation rate is 2.25%, and a maturity risk premium of 0.10% per year to

Suppose the real risk-free rate is 3.00%, the average expected future inflation rate is 2.25%, and a maturity risk premium of 0.10% per year to maturity applies, i.e., MRP = 0.10%(t 1), where t is the number of years until maturity. What rate of return would you expect to earn on a 1-year Treasury security?

5.08%

5.25%

5.62%

5.90%

6.19%

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