You Observe from the Wall Street Journal That the 1-Year

You observe from The Wall Street Journal that the 1-year Treasury bill rate is currently 6.0 percent and consider that it is a reasonable proxy for the nominal, risk-free rate. Your economic advisory service is also forecasting that the expected inflation rate for the next year (1-year rate) is 3.0 percent. With this information, calculate the real risk-free return, r*, and the inflation premium, IP.

A) r* = 2.8302%; IP = 3.1698%
B) r* = 2.9126%; IP = 3.0874%
C) r* = 2.9633%; IP = 3.0367%
D) r* = 3.0000%; IP = 3.0000%
E) r* = 3.0275%; IP = 2.9725%