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 = 0.70% E(21) = 1.85% E(3r1) = 1.95% E(41) = 2.25% 0.05% 42 = 43 = 0.10% L4= 0.12% Using the liquidity premium theory, determine the current (long-term) rates. Note: Do not round intermediate calculations. Round your percentage answers to 2 decimal places (i.e., 0.1234 should be entered as 12.34). Years 1 2 3 4 Current (Long-term) Rates 0.70% % % %
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 = 0.70% E(21) = 1.85% E(3r1) = 1.95% E(41) = 2.25% 0.05% 42 = 43 = 0.10% L4= 0.12% Using the liquidity premium theory, determine the current (long-term) rates. Note: Do not round intermediate calculations. Round your percentage answers to 2 decimal places (i.e., 0.1234 should be entered as 12.34). Years 1 2 3 4 Current (Long-term) Rates 0.70% % % %
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
Problem 1PS
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![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:
E(2^1)
0.70%
1.85%
= 1.95%
E(3r1)
E(41) = 2.25%
R₁ =
Years
1
2
3
4
=
42 =
0.05%
0.10%
L3
L4 = 0.12%
Using the liquidity premium theory, determine the current (long-term) rates.
Note: Do not round intermediate calculations. Round your percentage answers to 2 decimal places (i.e., 0.1234 should be entered
as 12.34).
=
Current (Long-term)
Rates
0.70 %
%
%
%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F6ba777a9-0201-4181-afdf-3b7f5df173c0%2F82a1dc99-6cc3-4ca0-9227-40d7ddc90d18%2Fg6qvejk_processed.png&w=3840&q=75)
Transcribed Image Text: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:
E(2^1)
0.70%
1.85%
= 1.95%
E(3r1)
E(41) = 2.25%
R₁ =
Years
1
2
3
4
=
42 =
0.05%
0.10%
L3
L4 = 0.12%
Using the liquidity premium theory, determine the current (long-term) rates.
Note: Do not round intermediate calculations. Round your percentage answers to 2 decimal places (i.e., 0.1234 should be entered
as 12.34).
=
Current (Long-term)
Rates
0.70 %
%
%
%
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