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Below is your forecasts of one-year T-bill (forward) rates for the following five years. Year 1-year spot and forward rates Liquidity premium 1 1.5% 0%
Below is your forecasts of one-year T-bill (forward) rates for the following five years. Year 1-year spot and forward rates Liquidity premium 1 1.5% 0% 2 2% 0.2% 3 2% 0.4% 4 2.5% 0.5% 5 3% 0.8% According to your forecasts, what should be the current 5-year interest rate today? Would you be willing to purchase a 5-year T-note at a 3.5% interest rate? 2.2%; No O 11.4%; No O 3.0%: Yes 0 2.2%; Yes O 11.4%; Yes O 3.0%; No
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