Capital Market Expectation - Practice problem nb 3

Hi all

in the third question of the Practice problem, the solution is assuming that the Risk Free Rate = the 1 year T-Note. while i was more leaning toward assuming that the RFR = 10 years Treasury bond.

Can somebody enlighten me?

Well I guess it’s quite clear that the RF should be a short-term rate, not?

You have to compare the weighted average return of the portfolio with the 10 year note return.

My problem with this question was that why do we use the long-term expected inflation, and not the current inflation rate when calculating expected return on the 1 year Tre note?

This link should help.