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30.10.2019 •
Mathematics
Suppose the real risk-free rate is 2.50% and the future rate of inflation is expected to be constant at 7.00%. what rate of return would you expect on a 5-year treasury security, assuming the pure expectations theory is valid? disregard cross-product terms, i.e., if averaging is required, use the arithmetic average. a. 9.50% b. 11.59% c. 7.70% d. 7.41% e. 8.46%
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Ответ:
option (a) 9.50%
Step-by-step explanation:
Data provided in the question:
The real risk free rate = 2.50%
The future rate of inflation = 7.00%
Now,
The Expected rate of return after 5 - year treasury deposited will be calculated using the relation,
Return rate = Inflation rate + Real risk free rate
on substituting the respective values, we get
Return rate = 7.00% + 2.50%
or
Return rate = 9.50%
Hence,.
the correct answer is option (a) 9.50%
Ответ:
that's not true
Step-by-step explanation:
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