Based on economists' forecasts and analysis, 1-year Treasury bill rates and liquidity premiums for the next four years are expected to e as follows: R₁ = 0.85% E(2r1) = 2.00% E(3r1) = 2.10% E(471) = 2.40% 42 = L3 = 0.08% 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 s 12.34). Current (long term)
Based on economists' forecasts and analysis, 1-year Treasury bill rates and liquidity premiums for the next four years are expected to e as follows: R₁ = 0.85% E(2r1) = 2.00% E(3r1) = 2.10% E(471) = 2.40% 42 = L3 = 0.08% 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 s 12.34). Current (long term)
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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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:
R₁
R1
0.85%
=
E(2r1) = 2.00%
E(3r1) =
2.10%
E(41) = 2.40%
42 =
0.08%
43 =
0.10%
L4
44 = 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
%
%
%
%
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