Problem $6-8$ Liquidity Premium Theory $($LG$6-7)$

Based on economists' forecasts and analysis, $1-$year Treasury bill rates and liquidity premlums for the next four years are expected to

be as follows:

$R_4=0\mathrm{.}75\%$

$E{(}_2{r}_1)=1\mathrm{.}90\%,L_2=0\mathrm{.}06\%$

$E(3r_1)=2\mathrm{.}00\%,I_3=0\mathrm{.}12\%$

$E(4r_1)=2\mathrm{.}30\%,L_4=0\mathrm{.}14\%$

Using the llquldity premium theory, determine the current $($long$-$term$)$ rates.

Note: Do not round Intermedlate calculatlons. Round your percentage answers to $2$ decimal places $(1.$e$.,0\mathrm{.}1234$ should be entered

$12\mathrm{.}34).$