What should the current rate be

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Question: One-year Treasury bills currently earn 3.15 percent. You expect that one year from now, 1-year Treasury bill rates will increase to 3.35 percent and that two years from now, 1-year Treasury bill rates will increase to 3.85 percent. The liquidity premium on 2-year securities is 0.05 percent and on 3-year securities is 0.15 percent. If the liquidity premium theory is correct, what should the current rate be on 3-year Treasury securities? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Reference no: EM132024932

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