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Consider the following data obtained on Treasury STRIPS of various maturities. N Yield 1 1.25% 2 1.85% 3 2.35% According to the liquidity preference hypothesis,

Consider the following data obtained on Treasury STRIPS of various maturities. N Yield 1 1.25% 2 1.85% 3 2.35% According to the liquidity preference hypothesis, the rate the market expects two years from now would be (refer to the previous question) A. less than the one you calculated above due to the liquidity premium B. greater than the one you calculated above due to the liquidity premium C. impossible to estimate by looking at the term structure D. relatively unimportant in determining the shape of the yield curve

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