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10. It is assumed that one-year interest rates on bonds over next five years are 6.5%, 6.75%, 7.25%, 8.50% and 9.25% and liquidity premium from
10. It is assumed that one-year interest rates on bonds over next five years are 6.5%, 6.75%, 7.25%, 8.50% and 9.25% and liquidity premium from one-year to five-year on bonds are 0%, 0.125% 0.25% 0.375% and 0.50%. What is the yield on 5-year bonds according to the liquidity premium theory? (A) 8.50% (B) 8.15% (C) 7.65%. (D) 6.75%. (E) 6.50%
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