1. Suppose the real risk-free rate is 3.50% and the future rate of inflation is expected to be constant at 4.20%. What rate of return would you expect on a 1-year Treasury security, assuming the pure expectations theory is valid? Include cross-product terms, i.e., if averaging is required, use the geometric average.

   	a.	7.85%
   	b.	6.36%
   	c.	8.16%
   	d.	9.02%
   	e.	8.24%