Question: Suppose the Fed is conducting a quantitative easing policy and they expect the liquidity premium will decrease by 0.20% and 0.10% for year 4 (L4)and

Suppose the Fed is conducting a quantitative easing policy and they

Suppose the Fed is conducting a quantitative easing policy and they expect the liquidity premium will decrease by 0.20% and 0.10% for year 4 (L4)and year 5 (L5)respectively. Assuming that the quantitative easing policy doesn t change expected one year rates in the foreseeable future, how much will 4-year zero coupon rate (7R4) and 5-year zero coupon rate (7R5) change? A. 41 R4 = -0.03%; A1 R5 = -0.05% B. 41 R4 = -0.04%; A1 R5 = -0.06% O C. 47 R4 = -0.05%; A7 R5 = -0.06% D. 41 R4 = -0.02%; A1 R5 = -0.07% E. A1 R4 = -0.04%; A1 R5 = -0.08%

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