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Suppose the yield on a one-year bond with no credit risk is 3.2% and the yield on a 3-year bond with no credit risk is

Suppose the yield on a one-year bond with no credit risk is 3.2% and the yield on a 3-year bond with no credit risk is 3.5%.

If investors require a risk premium to buy long-term bonds, how can the Liquidity Premium Theory explain a flat yield curve or a negatively sloping yield curve?

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