Question: Libby Jordan, a management trainee at a large Boston-based bank is trying to estimate the real rate of return expected by investors. He notes that

Libby Jordan, a management trainee at a large Boston-based bank is trying to estimate the real rate of return expected by investors. He notes that the 3-month T-bill currently yields 6 percent and has decided to use the consumer price index as a proxy for expected inflation. What is the estimated real rate of interest if the CPI is currently 2 percent? A. 6% B. 4% C. 3% D. 5.3% E. 3.5%

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