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Suppose we observe the following rates: 1 R 1 = 4 . 8 % , 1 R 2 = 5 . 6 % , and

Suppose we observe the following rates: 1R1=4.8%,1R2=5.6%, and E(2r1)=4.8%. If the liquidity premium theory of the term structure of interest rates holds, what is the liquidity premium for year 2?

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