Compute the quoted or risk-free-rate of return for year 8

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Suppose the real risk-free rate, r*, is 2% and investors expect inflation to be 4% next year, 5% the following year, and 7% per year thereafter. Assume the MRP is zero for Year 1 and increases by 0.1% each year. Compute the quoted, or risk-free, rate of return for Year 8.

Reference no: EM13328964

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