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Assume the interest rate of a three-year maturity zero coupon bond is 7.5% and a five-year bond is 9.5%. What is the expected interest rate

  1. Assume the interest rate of a three-year maturity zero coupon bond is 7.5% and a five-year bond is 9.5%. What is the expected interest rate between year three and five if you are considering:
  1. The liquidity preference theory?
  2. The expectations theory?

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