Suppose 1-Year T-Bills Currently Yield 7

question 53

Multiple Choice

Suppose 1-year T-bills currently yield 7.00% and the future inflation rate is expected to be constant at 2.00% per year.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.(Round your final answer to 2 decimal places. )

• A) 4.51%
• B) 4.85%
• C) 4.90%
• D) 3.87%
• E) 3.77%

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Definitions:

Psychometric Approach

A method in psychology that focuses on the design, administration, and interpretation of quantitative tests for the measurement of psychological variables such as intelligence, personality, and attitudes.

Crystallized Intelligence

A form of intelligence that involves the ability to use learned knowledge and experience.

Fluid Intelligence

The capacity to reason quickly and think abstractly, enabling problem-solving and learning independently of previous specific knowledge.

Hierarchical Model

A framework or model that organizes elements of a theory or concept into levels of subordination or rank, often used to describe systems, organizations, or relationships within data.