Finance questions....

Business & Finance
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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.

Jul 12th, 2015

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0.85%

is the correct answer

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Jul 12th, 2015

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Jul 12th, 2015
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Jul 12th, 2015
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