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Question: Liquidity Premium Hypothesis Based on economists' forecasts and analysis, one-year Treasury bill rates and liquidity premiums for the next four years are expected to be as follows: R1 = 6.70% E(r2) = 7.80% L2 = .15% E(r3) = 7.90% L3 = .25% E(r4) = 8.20% L4 = .30% Using the liquidity premium hypothesis, what is the current rate on a four-year Treasury security?

Microeconomics, Economics

  • Category:- Microeconomics
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