QUESTION 44 Year One-Year Rate Liquidity Premium

Year One-Year Rate Liquidity Premium

1 5.70% 0%

2 4.90% 0.25%

3 4.40% 0.50%

4 3.88% 0.75%

Based on the above information: According to expectations theory what is the expected interest rate for a bond with a maturity of four years?

3.88%

4.72%

5.00%

5.47%

QUESTION 45

Year	One-Year Rate	Liquidity Premium
1	5.70%	0%
2	4.90%	0.25%
3	4.40%	0.50%
4	3.88%	0.75%

Based on the above information: According to liquidity premium theory what is the expected interest rate for a bond with a maturity of four years?

4.63%

4.72%

5.10%

5.47%