Assuming that the liquidity premium theory is correct, what did investors on this day expect the interest rate to be on the one-year Treasury bill two years from now if the term premium on a two-year Treasury note was 0.10% and the term premium on a three-year Treasury note was 0.25%? Assume that all three securities are discount bonds that pay no coupons.

2.12 [Related to Solved Problem 5.2B on page 163] Use the data on Treasury securities in the table to answer the following question: 1 year 0.75% 2 year 1.25% 3 year 2.00%