Problem
The Wall Street Journal reports that the rate on three-year Treasury securities is 5.25 percent and the rate on four-year Treasury securities is 5.50 percent. The one-year interest rate expected in three years is E (3r1), 6.10 percent. According to the liquidity premium hypothesis, what is the liquidity premium on the four-year Treasury security, L 4?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.