Suppose the real risk-free rate is 3.00%, the average
expected future inflation rate is 2.60%, 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 would you
expect on a 1-year Treasury security, assuming the pure expectations theory is
NOT valid? Disregard cross-product
terms, i.e., if averaging is required, use the arithmetic average.