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You check the spot curve and find that the 1-year spot rate is 8.36%, the 2-year spot rate is 7.70%, the 3-year spot rate is
You check the spot curve and find that the 1-year spot rate is 8.36%, the 2-year spot rate is 7.70%, the 3-year spot rate is 4.90%,the 4-year spot rate is 6.63%, and the 5-year spot rate is 7.89%.
You believe in the liquidity preference theory and assume that there is a constant liquidity premium of 2.50%.
What is the 4-year short rate?
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