Question:
My real risk-free rate is 3.50%, average future inflation rate is 2.25%, and a maturity premium of 0.10% per year to maturity applies, i.e., MRP = 0.10%(t), where t is the years to maturity.
What is the rate of return I should expect on a 5-year Treasury security, assuming the pure expectations theory is not valid?
No cross-product terms are to be used.