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(Solved): Suppose the real risk-free rate is 2.3%, the average future inflation rate is 2%, and a maturity pr ...
Suppose the real risk-free rate is 2.3%, the average future inflation rate is 2%, and a maturity premium of 0.1% per year to maturity applies, i.e., MRP =0.1%(t), where t is the years to maturity. What rate of return would you expect on a 4-year Treasury security, assuming the pure expectations theory is NOT valid? 5.6%5.3%4.7%4.4%5.0%