Suppose the real risk-free rate is 3.00%, the average expected future inflation rate is 2.60%, 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? Disregard cross-product terms, i.e., if averaging is required, use the arithmetic average.

5.70%

Explanation:

Given that

Real risk free rate = 3%

Expected future inflation rate = 2.60%

Maturity risk premium = 0.10%

So, by considering the above information , the rate of return expected would be

= Real risk free rate + Expected future inflation rate + Maturity risk premium

= 3% + 2.60% + 0.10%

= 5.70%

We simply added the above three items so that the expected return could come

Features

Explanation:

Product benefits are what it does for the customer (makes hair shinier, saves time by being easy to open, etc). The features are aspects of the product that can provide benefits.