# Question: Based on economists forecasts and analysis one year Treasury bill rates

Based on economists’ forecasts and analysis, one-year Treasury bill rates and liquidity premiums for the next four years are expected to be as follows:

1R1 = 5.65%

E (2r1) = 6.75% ...... L2 = 0.05%

E (3r1) = 6.85% ...... L3 = 0.10%

E (4r1) = 7.15% ...... L4 = 0.12%

Using the liquidity premium theory, plot the current yield curve. Make sure you label the axes on the graph and identify the four annual rates on the curve both on the axes and on the yield curve itself.

1R1 = 5.65%

E (2r1) = 6.75% ...... L2 = 0.05%

E (3r1) = 6.85% ...... L3 = 0.10%

E (4r1) = 7.15% ...... L4 = 0.12%

Using the liquidity premium theory, plot the current yield curve. Make sure you label the axes on the graph and identify the four annual rates on the curve both on the axes and on the yield curve itself.

## Answer to relevant Questions

What is the difference between a required rate of return and an expected rate of return?How is duration related to the price elasticity of a fixed-income security? What is the relationship between duration and the price of a fixed- income security?Johnson Motors’s bonds have 10 years remaining to maturity. Interest is paid annually, the bonds have a $ 1,000 par value, and the coupon rate is 8 percent. The bonds have a yield to maturity of 9 percent. What is the ...Repeat parts (a) through (c) of Problem using a required rate of return on the bond of 8 percent. What do your calculations imply about the relation between the coupon rates and bond price volatility?In Problem, Calculate ...Consider the following. a. What is the duration of a four-year Treasury bond with a 10 percent semiannual coupon selling at par?b. What is the duration of a three-year Treasury bond with a 10 percent semiannual coupon ...Post your question