Suppose the rate of return on a 10-year T-bond is 5.35%, the expected average rate of inflation over the next 10 years is 2.0%, the MRP on a 10-year T-bond is 0.9%, no MRP is required on a TIPS, and no liquidity premium is required on any Treasury security. Given this information, what should the yield be on a 10-year TIPS? Disregard cross-product terms, i.e., if averaging is required, use the arithmetic average.

	a.	2.45%
	b.	2.38%
	c.	2.94%
	d.	3.04%
	e.	2.99%

Answer rating: 100% (QA)

The yield on a 10year Treasury InflationProtected Securities TIPS can be ... View the full answer