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Suppose the 2-year spot rate 5% and the 4-year spot rate 7%. The annual liquidity premium is 1%. According the expectation theory, what is the

Suppose the 2-year spot rate 5% and the 4-year spot rate 7%. The annual liquidity premium is 1%. According the expectation theory, what is the expected 2-year spot rate, 2 years from now?

8.04%

10.04%

9.04%

7.04%

11.04%

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