The table below shows current and expected future one-year interest rates, as well as current interest rates on multiyear bonds. Use the table to calculate the liquidity premium for each multiyear bond. /11 = % /21 = % 31 = 41 = 151 = Year 1 2 3 % % % One-Year Bond Rate 2.00% 3.00% 6.00% 9.00% 11.00% 4 5 The liquidity premiums for each year are given as: (Enter your responses rounded to two decimal places.) Multiyear Bond Rate 2.00% 4.00% 6.00% 7.00% 9.00%

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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The table below shows current and expected future​ one-year interest​ rates, as well as current interest rates on multiyear bonds. Use the table to calculate the liquidity premium for each multiyear bond.
 
Year
​One-Year Bond
Rate
Multiyear Bond Rate
1
2.00%
2.00%
2
3.00%
4.00%
3
6.00%
6.00%
4
9.00%
7.00%
5
11.00%
9.00%
Part 2
The liquidity premiums for each year are given​ as: ​(Enter your responses rounded to two decimal​ places.)
The table below shows current and expected future one-year interest rates, as well as current interest rates on multiyear bonds. Use the table to calculate the liquidity premium for
each multiyear bond.
3
/11
The liquidity premiums for each year are given as: (Enter your responses rounded to two decimal places.)
=
21 =
131
41
151
=
=
Year
1
2
3
4
5
%
%
%
%
One-Year Bond
Rate
2.00%
3.00%
6.00%
9.00%
11.00%
Multiyear Bond Rate
2.00%
4.00%
6.00%
7.00%
9.00%
Transcribed Image Text:The table below shows current and expected future one-year interest rates, as well as current interest rates on multiyear bonds. Use the table to calculate the liquidity premium for each multiyear bond. 3 /11 The liquidity premiums for each year are given as: (Enter your responses rounded to two decimal places.) = 21 = 131 41 151 = = Year 1 2 3 4 5 % % % % One-Year Bond Rate 2.00% 3.00% 6.00% 9.00% 11.00% Multiyear Bond Rate 2.00% 4.00% 6.00% 7.00% 9.00%
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