shawnball9913 shawnball9913

06-11-2020
Business

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Suppose 1-year T-bills currently yield 7.00% and the future inflation rate is expected to be constant at 2.00% per year. What is the real risk-free rate of return, r*

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Tundexi Tundexi

06-11-2020

Answer:

Real risk-free rate of return = 5.00%

Explanation:

r* = T-Bill yield - IP

Real risk-free rate of return = T-bills currently yield - Inflation rate

Real risk-free rate of return = 7.00% - 2.00%

Real risk-free rate of return = 5.00%

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