One-year treasury bills currently earn 225 percent you


One-year Treasury bills currently earn 2.25 percent. You expect that one year from now, 1-year Treasury bill rates will increase to 2.45 percent and that two years from now, 1-year Treasury bill rates will increase to 2.95 percent. The liquidity premium on 2-year securities is 0.05 percent and on 3-year securities is 0.15 percent. If the liquidity premium theory is correct, what should the current rate be on 3-year Treasury securities?

Request for Solution File

Ask an Expert for Answer!!
Financial Management: One-year treasury bills currently earn 225 percent you
Reference No:- TGS01394092

Expected delivery within 24 Hours