Problem:
The real risk-free rate is 2%. Inflation is expected to be 3% this year, 5% next year, and then 6% thereafter. The maturity risk premium is estimated to be 0.0004 x (t - 1), where t = number of years to maturity.
Required:
Question: What is the nominal interest rate on a 7-year Treasury security?
Note: Explain all steps comprehensively.