Based on economists’ forecasts and analysis, 1-year Treasury bill rates and liquidity premiums for the next four years are expected to be as follows: R1 = 1.75 % E(2r1) = 2.65 % L2 = 0.07 % E(3r1) = 3.05 % L3 = 0.09 % E(4r1) = 3.50 % L4 = 0.14 % Using the liquidity premium theory, determine the current (long-term) rates. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Based on economists’ forecasts and analysis, 1-year Treasury bill rates and liquidity premiums for the next four years are expected to be as follows: R1 = 1.75 % E(2r1) = 2.65 % L2 = 0.07 % E(3r1) = 3.05 % L3 = 0.09 % E(4r1) = 3.50 % L4 = 0.14 % Using the liquidity premium theory, determine the current (long-term) rates. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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