Question
The following are the forecasts for one-year T-bill rates for the next five years: Year One-year interest rate (%) 1 4.25 2 5.15 3 5.50
The following are the forecasts for one-year T-bill rates for the next five years:
| Year | One-year interest rate (%) |
| 1 | 4.25 |
| 2 | 5.15 |
| 3 | 5.50 |
| 4 | 6.25 |
| 5 | 7.10 |
You have a liquidity premium of 25 basis points for the next two years and 50 basis points thereafter. Would you be willing to purchase a four-year T-bond at a 5.75% interest rate?
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Managing Currency Options In Financial Institutions
Authors: Yat-Fai Lam, Kin-Keung Lai
1st Edition
1138778052, 978-1138778054
