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According to the yield curve for government bonds. the one - year bond yield is 5 % , the two - year yield is 6
According to the yield curve for government bonds. the oneyear bond yield is the twoyear yield is and the threeyear yield is Assume that the liquidity term premium on the oneyear bond is the liquidity premium on the twoyear bond is and the liquidity premium on the threeyear bond is According to the liquidity premium theory of the term structure, what is the expected oneyear interest rate next year and the following year? Briefly explain.
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