Question Question 1. Yearly rates are 4%, 5%, 6%, 7%, and 8% for the next five years. Please compute and explain the expected interest rate for both the three and four-year bonds if we show the liquidity premiums to be 1.25%, 1%, .75%, .5%, and 0%.
Question 2. Yearly rates are 4%, 5%, 6%, 7%, and 8% for the next five years. Please compute and explain the expected interest rate for both the three and four-year bonds during the period.