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Larry would like to invest a certain amount of money for two years and considers investing in a one-year bond that pays 6 percent and

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Larry would like to invest a certain amount of money for two years and considers investing in a one-year bond that pays 6 percent and a two-year bond that pays 8 percent. Larry is considering the following investment strategies: Strategy A: Buy a one-year bond that pays 6 percent and in year one, then buy another one-year bond that pays the forward rate in vear two, Strategy B: Buy a two-year bond that pays 8 percent in year one and 8 percent year two. If the one-year bond purchased in year two pays 12 percent, and the liquidity premium on a two-year bond is 0.7 percent, Larry wil choose

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