One-year Treasury bills currently earn 3.00 percent. You expect that one year from now, 1-year Treasury bill rates will increase to 3.20 percent and that two years from now, 1- year Treasury bill rates will increase to 3.70 percent. The liquidity premium on 2-year securities is 0.15 percent and on 3-year securities is 0.25 percent. If the liquidity premium theory is correct, what should the current rate be on 3-year Treasury securities? (Do not round Intermediate calculations. Round your answer to 2 decimal places.) Current rate 1%
One-year Treasury bills currently earn 3.00 percent. You expect that one year from now, 1-year Treasury bill rates will increase to 3.20 percent and that two years from now, 1- year Treasury bill rates will increase to 3.70 percent. The liquidity premium on 2-year securities is 0.15 percent and on 3-year securities is 0.25 percent. If the liquidity premium theory is correct, what should the current rate be on 3-year Treasury securities? (Do not round Intermediate calculations. Round your answer to 2 decimal places.) Current rate 1%
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:One-year Treasury bills currently earn 3.00 percent. You expect that one year from now,
1-year Treasury bill rates will increase to 3.20 percent and that two years from now, 1-
year Treasury bill rates will increase to 3.70 percent. The liquidity premium on 2-year
securities is 0.15 percent and on 3-year securities is 0.25 percent. If the liquidity premium
theory is correct, what should the current rate be on 3-year Treasury securities? (Do not
round Intermediate calculations. Round your answer to 2 decimal places.)
Current
rate
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