A $1-$year T$-$bond rate is currently $4\%(={?}_1{R}_1)$ while a $2-$year rate is currently $6\%(={?}_1{R}_2).$ Use this to

estimate ${?}_2{f}_1($forward rate for $1$ year bond in year $2).$

Report your answer in $\%$ to the nearest $0\mathrm{.}01\%$; e$.$g$.,$ enter $3\mathrm{.}95\%$ as $3\mathrm{.}95.$

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Question $28$

A one$-$year T$-$bond rate is currently $3\%$ and the one$-$year rate in $12$ months is expected to be

$2\mathrm{.}5\%$ in addition to a liquidity premium of $0\mathrm{.}25\%.$ Based on this information, what do expect

the two$-$year T$-$bond rate to currently be$?$

Report your answer in $\%$ to the nearest $0\mathrm{.}01\%$; e$.$g$.,$ enter $3\mathrm{.}95\%$ as $3\mathrm{.}95.$

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