Current rate be on two-year and three-year treasury security

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Reference no: EM132061997

One-year Treasury bills currently earn 3.25%. You expect that one year from now, 1-year Treasury bill rates will increase to 4.50% and that two years from now, 1-year Treasury bill rates will increase to 5.25%. The liquidity premium on 2-year securities is .75% and on 3-year securities is 1.00%. If the liquidity premium theory is correct, what should the current rate be on a 2-year and 3-year Treasury security?

Reference no: EM132061997

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