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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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