The Wall Street Journal reports that the rate on 5-year Treasury securities is 5.35 percent and the rate on 6-year Treasury securities is 5.60 percent. The 1-year interest rate expected in five years is, E(6'1), is 6.20 percent. According to the liquidity premium hypotheses, what is the liquidity premium on the 6-year Treasury security, L6? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
The Wall Street Journal reports that the rate on 5-year Treasury securities is 5.35 percent and the rate on 6-year Treasury securities is 5.60 percent. The 1-year interest rate expected in five years is, E(6'1), is 6.20 percent. According to the liquidity premium hypotheses, what is the liquidity premium on the 6-year Treasury security, L6? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 10P
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