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What is the rate of return

Suppose the real risk-free rate is 3.50% and the future rate of inflation is expected to be constant at 2.70%.  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.

Answers 6.57, 5.77, 5.52,6.20, 6.76




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