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.)

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
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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.)
Transcribed Image Text: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.)
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