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Suppose the real risk-free rate is 4.30% and the future rate of inflation is expected to be constant at 6.20%. What rate of return would
Suppose the real risk-free rate is 4.30% and the future rate of inflation is expected to be constant at 6.20%. What rate of return would you expect on a 1-year Treasury security, assuming the pure expectations theory is valid? Disregard cross-product terms, i.e., if averaging is required, use the arithmetic average. a. 4.30% b. 7.40% c. 4.57% d. 10.50% e. 5.25%
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