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 R 1 5 75 E ( r 2 ) 6 85 L 2 55 E ( r 3 ) 7 05 L 3 58 E ( r 4 ) 7 25 L 4 60 Using the liquidity premium hypothesis, what is the current rate on a fo...

The liquidity premium hypothesis states that longterm inte ...

Based on economists' forecasts and analysis, one-year Treasury bill rates and liquidity premiums for the next four

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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:

R₁ = 5.75%
E(r₂) = 6.85%	L₂ = .55%
E(r₃) = 7.05%	L₃ = .58%
E(r₄) = 7.25%	L₄ = .60%

Using the liquidity premium hypothesis, what is the current rate on a four-year Treasury security?

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