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Suppose we observe the following rates: 1 R 1 = 0 . 9 0 % , 1 R 2 = 1 . 3 5 %

Suppose we observe the following rates: 1R1=0.90%,1R2=1.35%, and E(2r1)=0.945%. If the liquidity premium theory of the term structure of interest rates holds, what is the liquidity premium for year 2, L2?

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