If investors expect a zero rate of inflation,then the nominal rate of return on a very short-term U.S.Treasury bond should be equal to the real risk-free rate,r*.

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If investors expect a zero rate of inflation, then the nominal rate of return on a very short-term U.S. Treasury bond should be equal to the real risk-free rate, r*. This is because in a zero inflation environment, the nominal rate of return and the real rate of return are the same.

If Investors Expect a Zero Rate of Inflation,then the Nominal