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Government economists have forecasted one-year T-bill rates for the following five years, as follows: Year 1-year rate (%) 1 .........4.25 2 .........5.15 3 .........5.50 4
Government economists have forecasted one-year T-bill rates for the following five years, as follows:
Year 1-year rate (%)
1 .........4.25
2 .........5.15
3 .........5.50
4 .........6.25
5 .........7.10
You have a liquidity premium of 0.25% for the next two years and 0.50% thereafter. Would you be willing to purchase a four-year T-bond at a 5.75% interest rate?
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