Suppose the real risk-free rate is 3.50% and the future rate of inflation is expected to be constant at 6.80%. What rate of return would you expect on a 1-year Treasury security, assuming the pure expectations theory is valid?

Select one:

a.

12.05%

b.

8.76%

c.

9.99%

d.

10.30%

e.

10.51%