Final answer:
The real risk-free rate is calculated by subtracting the inflation premium from the T-bill yield. In this case, it is 1.15%, which is the yield of 2.75% minus the inflation premium of 1.60%.
Step-by-step explanation:
The real risk-free rate of return is the return on an investment with no risk of financial loss, theoretically excluding any gains or losses caused by inflationary or deflationary pressures. The nominal interest rate is typically broken down into the real risk-free rate plus premiums that compensate for various risks. To find the real risk-free rate, we can subtract the inflation premium, as well as other risk premiums applicable to the investment, from the observed nominal rate. Given the 30-day T-bill yield is 2.75%, and the inflation premium today is 1.60%, we don't need to account for the liquidity or maturity risk premiums since they apply to different types of investments (such as bonds with longer maturities or less liquidity than T-bills).
Thus, the calculation for the real risk-free rate would be:
Real risk-free rate = T-bill yield - Inflation premium
Real risk-free rate = 2.75% - 1.60% = 1.15%
Therefore, the correct answer is c. 1.15%