Question
Problem 6-18 Liquidity Premium Theory (LG6-5) Suppose we observe the following rates: 1 R 1 = 0.75%, 1 R 2 = 1.20%, and E (
Problem 6-18 Liquidity Premium Theory (LG6-5)
| Suppose we observe the following rates: 1R1 = 0.75%, 1R2 = 1.20%, and E(2r1) = 0.939%. If the liquidity premium theory of the term structure of risk-free rates holds, what is the liquidity premium for year 2, L2? (Do not round intermediate calculations. Round your final answer to 3 decimal places.) |
| Liquidity premium | % |
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Financial And Insurance Formulas
Authors: Tomas Cipra
2010th Edition
3790829013, 978-3790829013
