Assuming that the liquidity premium theory is correct on


Use the data on Treasury securities in the following table to answer the? question:

Date 1 year 2 year 3 year

03/05/2010 0.37% 0.88?% 1.63?%

Source: U.S. Department of the Treasury.

Assuming that the liquidity premium theory is? correct, on March? 5, 2010, what did investors expect the interest rate to be on the? one-year Treasury bill two years from that date if the term premium on a? two-year Treasury note was 0.05?% and the term premium on a? three-year Treasury note was 0.06?%?

The expected interest rate is %. ?(Round your response to two decimal? places.)

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Finance Basics: Assuming that the liquidity premium theory is correct on
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