How would liquidity premiums explain each of these situation

Reference no: EM132208237

Question - The 25-year spot rate is 5%. The 30-year is 6%.

Why is the implied 5-year forward rate 25 years from now unrealistic as the market's expectations for interest rates in 25 years?

What if the 30-year rate is 4.85%-same question?

How would liquidity premiums explain each of these situations?

Reference no: EM132208237

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