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Question 7 (4 points) Assume that a one-year bond currently pays 5% interest. It's expected that it will pay 4.5% next year and 4% the

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Question 7 (4 points) Assume that a one-year bond currently pays 5% interest. It's expected that it will pay 4.5% next year and 4% the following year. The two-year term premium is 0.2% while the three-year term premium is 0.35%. What is the interest rate on a two-year bond according to the liquidity premium theory? 4.75% 4.5% 4.975% 4.95%

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