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Suppose the real risk-free rate is 2.85% and the future rate of inflation is expected to be constant at 2.10%. What rate of return would you expect on a 1-year Treasury security, assuming the pure expectations theory is valid? Include cross-product terms, i.e., if averaging is required, use the geometric average. (Round your final answer to 2 decimal places.)

a. 5.01% b. 2.85% c. 4.95% d. 2.91% e. 2.16%

User GuiGS
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Answer:Corporations step up their expansion plans and thus increase their demand for capital.

Explanation:

User Adampetrie
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