5-Year Treasury Bonds Yield 6

Suppose the real risk-free rate is 3.50% and the future rate of inflation is expected to be constant at 4.20%.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) 7.30% B) 7.85% C) 7.69% D) 6.91% E) 5.96%

Suppose the real risk-free rate is 3.00%,the average expected future inflation rate is 6.60%,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? Include the cross-product term,i.e. ,if averaging is required,use the geometric average.(Round your final answer to 2 decimal places. ) A) 7.62% B) 9.50% C) 9.90% D) 11.18% E) 10.69%