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On the U.S. Treasury Resource Center for interest rates (https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield), you see the following current (spot) interest rates for Treasury bonds with an upward sloping

On the U.S. Treasury Resource Center for interest rates (https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield), you see the following current (spot) interest rates for Treasury bonds with an upward sloping yield curve: 5-year bond rate =1.94%; 10-year bond rate = 2.45%

b. suppose there is a liquidity premium of 0.45% for a 10-year bond and 0.20% for a 5-year bond, under the liquidity premium theory (adjusting for liquidity premiums incorporated in bond rates) what is the new expected 5-year bond rate 5 years from now?

Based on your answer, what are rates expected to do (rise/fall/stay the same)? Explain why and why the expected rate under the liquidity premium theory differs from that of the expectations theory. Expected Rate with LP __________ Rates Expected to __________________ (Be sure to show your work here).

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