Discuss terms-liquidity and maturity risk premiums

Reference no: EM131936891

Question: Assume that the expectations theory holds, and that liquidity and maturity risk premiums are zero. If the annual rate of interest on a 2-year Treasury bond is 15 percent and the rate on a 1-year Treasury bond is 8 percent, what rate of interest should you expect on a 1-year Treasury bond one year from now?

Reference no: EM131936891

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