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Suppose the real risk-free rate is 4.20%, the average expected future inflation rate is 5.10%, anda maturity risk premium of 0.10% per year to maturity

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Suppose the real risk-free rate is 4.20%, the average expected future inflation rate is 5.10%, anda maturity risk premium of 0.10% per year to maturity applies, ie, MRP = 0.10% (t-1), where is the number of years to maturity, hence the pure expectations theory is NOT valid. Whatrate of return would you expect on a 10-year Treasury security Disregard Co-product terms, ie if averaging is required, the situatie average A. 10.1% 8. 103

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