Government economists have forecasted one year T bill rates for the following five years, as follows:
|
Year |
1 year rate (%) |
|
1 |
4.25 |
|
2 |
5.15 |
|
3 |
5.5 |
|
4 |
6.25 |
|
5 |
7.1 |
You have a liquidity premium of 0.25% for the next two years and 0.50% thereafter. Would you be willing to purchase a four year T bond at a 5.75% interest rate?