What is the interest rate that the expectations theory

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If the real interest rate in the economy is 3% and the expected inflation is 2% per year over a five year period, assuming the maturity risk premium is 0, what is the interest rate that the expectations theory would predict for a five year Treasury note?

a. 10% b. 3% c. 2% d. 6% e. 5%

Reference no: EM13950113

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