A recent edition of The Wall Street Journal reported interest rates of 8.75 percent, 9.10 percent, 9.48 percent, and 9.75 percent for 3-, 4-, 5- and 6-year Treasury security yields, respectively. According to the unbiased expectation theory of the term structure of interest rates, wh are the expected 1-year forward rates for years 4, 5, and 6? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

A recent edition of The Wall Street Journal reported interest rates of 8.75 percent, 9.10 percent, 9.48 percent, and 9.75 percent for 3-, 4-, 5- and 6-year Treasury security yields, respectively. According to the unbiased expectation theory of the term structure of interest rates, wh are the expected 1-year forward rates for years 4, 5, and 6? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter7: Types And Costs Of Financial Capital

Section: Chapter Questions

Problem 2EP

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Suppose we observe the following rates: 1R1 = 0.75%, 1R2 = 1.20%, and E(2r1) = 0.907%. If the liquidity premium theory of the term structure of interest rates holds, what is the liquidity premium for year 2, L2? (Do not round intermediate calculations. Round your answer to 3 decimal places.)
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