Question: ( Real interest rates: approximation method ) If the real risk-free rate of interest is 3.7% and the rate of inflation is expected to be

(Real interest rates: approximation method)

If the real risk-free rate of interest is 3.7% and the rate of inflation is expected to be constant at a level of 2.5%, what would you expect 1-year Treasury bills to return if you ignore the cross product between the real rate of interest and the inflation rate?

The expected rate of return on 1-year Treasury bills is ____%. (Round to one decimal place.)

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