Refer to the figure displaying yield for February 7, 2019. Suppose the liquidity premium investors require to hold a 2-year security is 0.1% and the liquidity premium on a 3-year security is 0.2%. On the date these yields were observed, what did investors expect the yield to be on a 1-year security two years in the future? Answer as a percent, round to two decimal places and do not enter a "%" sign. Annual percentage rate 4.0 3.5 3.0 2.5 2.0 15 U.S. Treasury Yields 1.0- 0.5- 0.0 N 43% 6-mo 2.55% 1-yr 2.48% 2-yr 2.46% 3-yr 2.46% 5-yr Maturity 2.65% 02/07/2019 2.85% 3.0% 10-yr 20-yr 30-yr Source: Board of Governors of the Federal Reserve System

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Chapter1: Making Economics Decisions
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Refer to the figure displaying yield for February 7, 2019. Suppose the liquidity premium investors
require to hold a 2-year security is 0.1% and the liquidity premium on a 3-year security is 0.2%. On
the date these yields were observed, what did investors expect the yield to be on a 1-year security
two years in the future? Answer as a percent, round to two decimal places and do not enter a '%'
sign.
Annual percentage rate
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
U.S. Treasury Yields
2.43%
6-mo
2.55%
1-yr
2.48%
2-yr
2.46%
3-yr
2.46%
5-yr
Maturity
2.65%
02/07/2019
2.85%
3.0%
10-yr
20-yr
30-yr
Source: Board of Govermors of the Federal Reserve System
Transcribed Image Text:Refer to the figure displaying yield for February 7, 2019. Suppose the liquidity premium investors require to hold a 2-year security is 0.1% and the liquidity premium on a 3-year security is 0.2%. On the date these yields were observed, what did investors expect the yield to be on a 1-year security two years in the future? Answer as a percent, round to two decimal places and do not enter a '%' sign. Annual percentage rate 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 U.S. Treasury Yields 2.43% 6-mo 2.55% 1-yr 2.48% 2-yr 2.46% 3-yr 2.46% 5-yr Maturity 2.65% 02/07/2019 2.85% 3.0% 10-yr 20-yr 30-yr Source: Board of Govermors of the Federal Reserve System
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