Answer: C. 4.18%
Explanation: (1 + nominal rate) = (1 + real rate) x (1 + inflation premium)
Rearranging the formula to solve for the inflation premium, we get:
inflation premium = (1 + nominal rate) / (1 + real rate) - 1
Plugging in the given values, we get:
inflation premium = (1 + 0.063) / (1 + 0.028) - 1 = 0.0408 or 4.08%
Therefore, the expected inflation premium is 4.08%, which is closest to option C (4.18%).