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(Liquidity Premium Theory) Assume that term premia increase with maturity. Furthermore, assume that at a given point in time the yield curve is flat. The

image text in transcribed (Liquidity Premium Theory) Assume that term premia increase with maturity. Furthermore, assume that at a given point in time the yield curve is flat. The shape of the yield curve is indicative of investor expecting the future short interest rates to remain constant increase decline be equal to term premia

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