The wall street journal reports the rate on two-year


The Wall Street Journal reports the rate on two-year Treasury securities is 4.15% and the rate on three-year Treasury securities is 5.27%.  The one-year interest rate expected in two years, E(3r1), is 7.11%.  According to the liquidity premium theory, what is the liquidity premium on a three-year Treasury, L3?

4.36%

4.90%

0.44%

0.49%

None of the above

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Finance Basics: The wall street journal reports the rate on two-year
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