The real risk-free rate is 4%. Inflation is expected to be 3% this year, 4% next year,
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Question:
The real risk-free rate is 4%. Inflation is expected to be 3% this year, 4% next year, and then 4.5% thereafter. The maturity risk premium is estimated to be 0.0004 (t - 1), where t = number of years to maturity. What is the nominal interest rate on a 7-year Treasury security? Do not round intermediate calculations. Round your answer to two decimal places.
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