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give correct option of Q35 in 5 mins I will give you thumb up The following graph shows a hypothetical yleld curve for the Treasury

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give correct option of Q35 in 5 mins I will give you thumb up

The following graph shows a hypothetical yleld curve for the Treasury discount bonds. Suppose that imvestors are risk-averse and they require a 1 percent liquidity premium on two-year bonds and 2 percent liquidity premium on 3-year bonds. According to the liquidity preference typothesis of the term structure, market participants expect the one-year interest rate next year to be: A. 40 persent b. 3.50 percent c. 3.00 percent d. 2.50 percent

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