Question: One - year Treasury bills currently earn 2 . 9 5 percent. You expect that one year from now, oneyear Treasury bill rates will increase

One-year Treasury bills currently earn 2.95 percent. You expect that one year from now, oneyear Treasury bill rates will increase to 3.15 percent and that two years from now, one-year Treasury bill rates will increase to 3.35 percent. The liquidity premium on two-year securities is 0.05 percent and on three-year securities is 0.15 percent. If the liquidity theory is correct, what should the current rate bef on three-year Treasury securities?
A)2.95 percent
B)3.15 percent
C)3.22 percent
D)3.35 percent
One - year Treasury bills currently earn 2 . 9 5

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