The real risk-free rate is 2.65%, inflation is expected to be 4.30% this year, and the maturity risk premium is zero. Ignoring any cross-product terms, i.e., if averaging is required, use the arithmetic average, what is the equilibrium rate of return on a 1-year Treasury bond?

A. 2.65%

b. 5.63%

c. 6.95%

d. 2.76%

E . 3.47%