Economics Help required ASAP! DUE IN HALF AN HOUR
You are given the following information:
Bonds 1-year 2-year 3-year
Yield 0.75% 1.25% 2:00%
CPI 120 125 118
Term premium 0.10% 0.25%
Assuming the liquidity premium theory is correct. Calculate – 2 points each (make sure you show all of your work!)
1. The expected one year rate.
2. The expected real rate on the 1-year Treasury bill two years from today.
3. The expected real rate on the 1-year Treasury bill three years from today.
4. The expected after tax real rate on the 1-year Treasury bill three years from today if the marginal tax rate is 31%.