Explain what is the nominal interest rate

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Reference no: EM13215599

The real risk-free rate is 3%. Inflation is expected to be 4% this year, 5% next year, and then 4.5% thereafter. The maturity risk premium is estimated to be 0.0004 x (t - 1), where t = number of years to maturity. What is the nominal interest rate on a 7-year Treasury security? Round your answer to two decimal places.

Reference no: EM13215599

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