The real risk-free rate is 3.05%,inflation is expected to be 5.95% 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) 8.37%
B) 9.00%
C) 8.82%
D) 10.80%
E) 9.09%
Correct Answer:
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