(Answered) Government economists have forecasted one-year t-bill rates

Finance

Government economists have forecasted one-year T-bill rates for the following five years, as follows:

Year 1-year rate (%)

1 ......... 4.25

2 ......... 5.15

3 ......... 5.50

4 ......... 6.25

5 ......... 7.10

You have a liquidity premium of 0.25% for the next two years and 0.50% thereafter.

Would you be willing to purchase a four-year T-bond at a 5.75% interest rate?

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