4) Suppose the real risk-free rate is 3.50% (k*), the average future inflation rate is 2.25%, and a maturity risk premiu

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4) Suppose the real risk-free rate is 3.50% (k*), the average future inflation rate is 2.25%, and a maturity risk premiu

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4) Suppose the real risk-free rate is 3.50% (k*), the average
future inflation rate is 2.25%, and a maturity risk premium of
0.10% per year to maturity applies, i.e. MRP = 0.10(t)% where “t”
is the years to maturity. What rate of return (k) would you
expect on a 5-year Treasury security?
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