Answer Happy

Suppose the real risk-free rate is 3.50%, the average future inflation rate is 2.25%, and a maturity premium of 0.10% per year to maturity applies, i.e., MRP = 0.10. What rate of return would you expect on a 1-year (short term) Treasury security? O 5.95% 5.85% 6.05% 5.75%