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Problem:

The real risk-free rate is 3%. Inflation is expected to be 3% this year, 4% next year and 3.5% thereafter. The MRP is estimated to be 0.05% (t-1) where t is the number of years to maturity.

Required:

Question: What is the nominal interest rate on a 7-yr U.S. Treasury bond?

Note: Please explain comprehensively and give step by step solution.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91149128

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