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the following two term structure questions. i) Using material from the subject, briefly explain which term structure theory you believe is the one you are
the following two term structure questions. i) Using material from the subject, briefly explain which term structure theory you believe is the one you are most likely to use in your professional practice. Use dot points where necessary. [5 Marks] ii) Suppose that you assumed that the liquidity premium hypothesis was correct. Briefly explain how the incorporation of a liquidity premium affects the slope of the yield curve compared with the expectations theory model. Use dot points where necessary
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