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using the same information, what interest rate would you expect a 6- year bond to have under the liquidity premium theory? please use liquiditt premium
using the same information, what interest rate would you expect a 6- year bond to have under the liquidity premium theory?
Using liquidity premium theory: You observe that there is a one-year Treasury bond with a yield of 2.0%. You also assume that rates will be going up and that the one-year bond will go up by 0.5% each year. As an example, you expect the one-year bond in year 2 will be 2.5% and 3% in year 3 . With that information, what do you expect the 3 -year interest rate to be if you require a liquidity premium of 0.15% for each year beyond year one please use liquiditt premium theory for both questions.
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