Consider the Table below, showing the interest rates on Treasury bills with different maturities. Maturity 1 year 3 year
Posted: Tue Jan 18, 2022 12:57 pm
Consider the Table below, showing the interest rates on Treasury bills with different maturities. Maturity 1 year 3 year Interest rate 1.25% 2.00% 2.50% 2 year Given the above data and assuming that the liquidity premium theory is valid, what would investors expect the interest rate to be on the one-year Treasury bill in two years from now if the term premium on a two-year Treasury bill is 0.20% and the term premium on a three-year Treasury bill is 0.40%?