The real risk-free rate of interest (r*) is 3 percent. Inflation is expected to be 4 percent this coming year, jump to 5 percent next year, and increase to 6 percent the year after. According to the expectations theory, what should be the interest rate on 3-year, risk-free securities today?
6% b. 7% c. 8% d. 9% e. 10%