Question
Use the data in the following table on Treasury securities of different maturities to answer the question: Date 1 year 2 year 3 year 03/05/2010
Use the data in the following table on Treasury securities of different maturities to answer the question: Date 1 year 2 year 3 year 03/05/2010 0.38% 0.91% 1.43% ----------------------------------------------------------------------------------- Source: U.S. Department of the Treasury. Assume that the liquidity premium theory is correct. Also assume that on March 5, 2010 the term premium on a two-year Treasury note was 0.02% and the term premium on a three-year Treasury note was 0.06%. a. Calculate the interest rate investors expected on the one-year Treasury bill one year from March 05, 2010 b. Using the result from question (a), calculate the interest rate investors expected on the one-year Treasury bill two years from March 05, 2010
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