Question: Use the data on Treasury securities in the table to answer the following question: 1 year 0.75% 2 year 1.5% 3 year 0.75% Assuming that

Use the data on Treasury securities in the table to answer the following question:

1 year 0.75% 2 year 1.5% 3 year 0.75%

Assuming that the liquidity premium theory is correct, and that term premium on a 2 year bond is 0.2 and that the term premium on a three year bond is 0.4, what did investors on this day expect the interest rate to be on one-year Treasury bill two years from now? Show your work.

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