Question: The Wall Street Journal reports that the rate on 3 year
The Wall Street Journal reports that the rate on 3-year Treasury securities is 5.25 percent and the rate on 4-year Treasury securities is 5.50 percent. The 1-year interest rate expected in three years is, E(4r1), 6.10 percent. According to the liquidity premium theories, what is the liquidity premium on the 4-year Treasury security, L4?
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