Suppose the real risk-free rate is 2.50% and the future rate of inflation is expected to be constant at 7.00%. What rate of return would you expect on a 5-year Treasury security, assuming the pure expectations theory is valid? Disregard cross-product terms, i. e., if averaging is required, use the arithmetic average. a. 9.50% b. 11.59% c. 7.70% d. 7.41% e. 8.46%
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