Answer:
2.06%
Explanation:
in order to determine the real risk free rate of return we can use the following formula:
real risk free rate = [(1 + T-bond yield - T-bond maturity risk premium) / (1 + inflation rate)] -1
real risk free rate = [(1 + 5% - 0.9%) / (1 + 2%)] -1 = (1.041 / 1.02) - 1 = 1.0206 - 1 = 0.0206 = 2.06%