Answer:
9.33%
Explanation:
The computation of the interest rate on a three-year bond is shown below:
Data given in the question
Yield on a one-year bond is 4%
For two years, it is 6%
And, for third year, it is 9%
And, the liquidity premium is 3%
So, the interest rate on a three year bond is
= (4% + 6% + 9%) ÷ 3 years + 3%
= 6.33% + 3%
= 9.33%
