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Government economists have forecasted one-year T-bill rates for the following five years as follows: Year 1-year rate 1 4.25% 2 5.15% 3 5.50% 4 6.25%
Government economists have forecasted one-year T-bill rates for the following five years as follows:
Year | 1-year rate |
1 | 4.25% |
2 | 5.15% |
3 | 5.50% |
4 | 6.25% |
5 | 7.10% |
You have liquidity premium 0.25% for the next two years and 0.50% thereafter. Would you be
willing to purchase a 4-year T-bond at a 5.75% interest rate?
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