Question
Suppose we observe the following rates: 1 R 1 = 0.90%, 1 R 2 = 1.40%, and E ( 2 r 1 ) = 0.925%.
Suppose we observe the following rates: 1R1 = 0.90%, 1R2 = 1.40%, and E(2r1) = 0.925%. 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 answer to 3 decimal places.)
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ISE Essentials Of Investments
Authors: Zvi Bodie, Alex Kane, Alan Marcus
12th International Edition
1265450099, 9781265450090
