QUESTION 1 33 polnts Save Answer The cal risk-free rate is 3.05%, inf stion is e

Question

QUESTION 1 33 polnts Save Answer The cal risk-free rate is 3.05%, inf stion is expected to be 3.60% this year, and the maturity risk premium is zcro. I average, what is the equilibrium rate of retum on a 1-year Treasury bond? oring any cross-product ns, i ifa e aging is required, use the arithmetic 8.18% b.665% 5.72% 04532% QUESTION 2 3.3 peints Seve Arewr Suppose the real risk-free rate is 420% the enge c pected f tare in ation rate is 2.50%, and a maturity risk premium of 0.10% per year to maturity applies ie. MRP 0.10% hero t is the number of years to maturity. What rate of return would you expoct on a 4-ycar Treasury socurity? Disegard cross-peodact tem, Le, if averaging is required, use the arithmecie average 7.67% 7.53% d, 696%

Explanation / Answer

1)

equilibrium rate of return

=3.05%+3.60%

=6.65%

the above is the answer because treasury bonds are at nominal rate of return.

we do only one question based on Chegg rule.

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