Question: Real interest rates: approximation method ) If the real risk-free rate of interest is 4.7 %4.7% and the rate of inflation is expected to be

Real

interest rates: approximation

method)

If the real risk-free rate of interest is

4.7 %4.7%

and the rate of inflation is expected to be constant at a level of

2.4 %2.4%,

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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