Question

Assuming that the liquidity premium theory is​ correct, on March​ 5, 2010, what did investors expect the interest rate to be on the​ one-year Treasury bill two years from that date if the term premium on a​ two-year Treasury note was 0.010.01​% and the term premium on a​ three-year Treasury note was 0.040.04​%?

Answer 1

The completed question is

Use the data on Treasury securities in the following table to answer the question:Date1 year2 year3 year03/05/20100.360.36% 0.860.86% 1.61.6%Source: U.S. Department of the Treasury.Assuming that the liquidity premium theory is correct, on March 5, 2010, what did investors expect the interest rate to be on the one-year Treasury bill two years from that date if the term premium on a two-year Treasury note was 0.040.04% and the term premium on a three-year Treasury note was 0.050.05%?

The expected interest rate is 3.013.01%.

Step-by-step explanation:

Base on the scenario been described in the question, the interest rate in given as 3.013.01%.