hat would be the interest rate on a 10-year Treasury note, given the following information?

kpr = 1%

MR = 0.1% for a 1-year loan, increasing by 0.1% each additional year.

LR = 0.5% for a security with low liquidity and 1.0% for one with very low liquidity.

DR= 0 for a 1-year loan, 0.1% for a 2-year loan, increasing by 0.15 % for each additional year. Expected inflation rates:

Year 1 = 3.0%

Year 2 = 4.0%

Year 3 and thereafter:

Which answer is correct?

5.0%

8.1%

7.0%

7.2%

6.7%