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Business, 20.04.2020 21:59 turboslayer

Suppose the rate of return on a 10-year T-bond is 4.05%, 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. 1.15%
b. 1.41%
c. 1.05%
d. 1.17%
e. 1.22%

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