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1 year 2 years 3 years 1.50% 2.25% 3.25%Table 5.1 shows the interest rates for Treasury securities of different maturities. Assume that the liquidity...


 1 year 2 years 3 years 1.50% 2.25% 3.25%Table 5.1 shows the interest rates for Treasury securities of different maturities. Assume that the liquidity premium theory is correct.



Refer to Table 5.1 On this day, what did investors expect the interest rate to be on the one-year Treasury bill in two years if the term premium on a two-year Treasury note is 0.25%?


1.875%

2.25%

2.375%

2.5%

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