Problemsuppose 1-year t-bills currently yield 700 and the, Ask an Expert

Accounting

Problem:

Suppose 1-year T-bills currently yield 7.00% and the future inflation rate is expected to be constant at 3.20% per year.

Required:

Question: What is the real risk-free rate of return, r*? The cross-product term should be considered, i.e., if averaging is required, use the geometric average.

a. 3.87%
b. 4.06%
c. 4.26%
d. 4.48%
e. 3.68%

Note: Show supporting computations in good form.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91170542

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