Given the current and expected short-term interest rates for the coming years and the
corresponding liquidity premiums are as follows:
RI=5.99%
E(21)=5.95% L=0.08% E(3ri)=5.90% La=0.10%
E(ari) =5.88% La=0.12%
Calculate the long-term rates for two-, and three-year-maturity Treasury securities
b.
according to the Unbiased Expectations Theory. Calculate the long-term rates for two-, three-, and four-year-maturity Treasury
securities according to the Liquidity Premium Theory