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Suppose the real risk-free rate is 3.00%,the average expected future inflation rate is 6.60%,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? Include the cross-product term,i.e. ,if averaging is required,use the geometric average.(Round your final answer to 2 decimal places. )
International Specialization
A method where countries or regions focus on producing goods and services they are most efficient at, to enhance global trade efficiency.
Economies Of Scale
The reduction in cost per unit of goods or services produced as the scale of output increases.
World Price
The international market price of a commodity, determined by global supply and demand conditions.
Per-Unit Tariff
A specific tax levied on each unit of a good imported into a country, as opposed to a percentage of the value.
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