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QUESTION 3 Consider the following expected one-year interest rates. If the yield curve is flat at 3%, what would the liquidity premiums be, according to
QUESTION 3 Consider the following expected one-year interest rates. If the yield curve is flat at 3%, what would the liquidity premiums be, according to the liquidity premium theory? . 1R1 = 3.00% E(2R1) = 2.70% E(3R1) = 2.50% E(4R1) = 2.30% A. L2 = 0.30%; L3 = 0.40%; L4 = 0.45% B. L2 = 0.30%; L3 = 0.50%; L4 = 0.70% C. L2 = 0.30%; L3 = 0.40%; L4 = 0.55% D. L2 = 0.15%; L3 = 0.50%; L4 = 0.75% E. L2 = 0.20%; L3 = 0.50%; L4 = 0.75%
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