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Exercise 2: Consider a mean-variance optimizer that wants to invest in bonds for two periods. In order for them to be indifferent between the two
Exercise 2: Consider a mean-variance optimizer that wants to invest in bonds for two periods. In order for them to be indifferent between the two year bonds and rolling over two one year bonds, what must the liquidity premium equal? What if the want to invest inNperiods and are indifferent between theNperiod bond and anN1 period bond rolled over into a one period bond
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