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The Real Risk-Free Rate Is 3

question 4

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The real risk-free rate is 3.05%,inflation is expected to be 5.95% this year,and the maturity risk premium is zero.Ignoring any cross-product terms,i.e. ,if averaging is required,use the arithmetic average,what is the equilibrium rate of return on a 1-year Treasury bond?


Definitions:

Due Diligence

A comprehensive appraisal of a business or individual’s financial performance, legal obligations, and other details conducted before entering into an agreement or transaction.

Short-termism

The focus on immediate results or benefits at the expense of long-term interests or sustainability.

Quarterly Earnings

The financial performance reports of a company issued every three months, often including net income, earnings per share, and net sales.

Due Diligence

A comprehensive appraisal of a business or individual’s performance, financial records, or legal obligations, conducted typically before entering into an agreement.

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