Question
Use the data on Treasury securities in the following table to answer the question: Date 1 year 2 year 3 year 03/05/2010 0.39 % 0.91
Use the data on Treasury securities in the following table to answer the question:
Date | 1 year | 2 year | 3 year |
03/05/2010 | 0.39 % | 0.91 % | 1.5 % |
Source: U.S. Department of the Treasury.
Assuming that the liquidity premium theory is correct, on March 5, 2010, what did investors expect the interest rate to be on the one-year Treasury bill two years from that date if the term premium on a two-year Treasury note was 0.01 % and the term premium on a three-year Treasury note was 0.06 %?
The expected interest rate is % (Round your response to two decimal places.)
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