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Problem 6-11 Liquidity Premium Theory (LG6-7) Based on economists’ forecasts and analysis, 1-year Treasury bill rates...

Problem 6-11 Liquidity Premium Theory (LG6-7)

Based on economists’ forecasts and analysis, 1-year Treasury bill rates and liquidity premiums for the next four years are expected to be as follows:

R1 = 0.55 %
E(2r1) = 1.70 % L2 = 0.08 %
E(3r1) = 1.80 % L3 = 0.12 %
E(4r1) = 2.10 % L4 = 0.14 %

Using the liquidity premium theory, determine the current (long-term) rates. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

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