Government economists have forecasted one-year T-bill rates for the following five years, as follows:
Year 1-year rate (%)
1 ......... 4.25
2 ......... 5.15
3 ......... 5.50
4 ......... 6.25
5 ......... 7.10
You have a liquidity premium of 0.25% for the next two years and 0.50% thereafter.
Would you be willing to purchase a four-year T-bond at a 5.75% interest rate?