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Liquidity Premium Hypothesis The Wall Street Journal reports that the rate on three-year Treasury securities is 4.75 percent and the rate on four-year Treasury securities
Liquidity Premium Hypothesis The Wall Street Journal reports that the rate on three-year Treasury securities is 4.75 percent and the rate on four-year Treasury securities is 5.00 percent. The one-year interest rate expected in three years is E( 4 r 1), 5.25 percent. According to the liquidity premium hypotheses, what is the liquidity premium on the four-year Treasury security, L 4?
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