question archive ree rate is 3%, inflation is expected to be 2% this year, and the maturity risk premium is zero
ree rate is 3%, inflation is expected to be 2% this year, and the maturity risk premium is zero
Subject:FinancePrice:2.86 Bought3
ree rate is 3%, inflation is expected to be 2% this year, and the maturity risk premium is zero. Ignoring any cross-product terms, what is the equilibrium rate of return on a 1-year T-bond?
a. 4.95%
b. 5.05%
c. 5.00%
d. 5.10%
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1-year T-bond rate = Real rate+IP+MRP
=3+2+0
=5%
