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

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Question

Accounting

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

Date

1 year

2 year

3 year

03/05/2010

0.39 %

0.91 %

1.5 %

Source: U.S. Department of the Treasury.

Assuming that the liquidity premium theory is correct, on March 5, 2010, what did investors expect the interest rate to be on the one-year Treasury bill two years from that date if the term premium on a two-year Treasury note was 0.01 % and the term premium on a three-year Treasury note was 0.06 %?

The expected interest rate is % (Round your response to two decimal places.)

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