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The WSJ reports that the rate on the three-year Treasury security is 5.25% and the rate on the four-year Treasury security is 5.5%. The one-year
The WSJ reports that the rate on the three-year Treasury security is 5.25% and the rate on the four-year Treasury security is 5.5%. The one-year rate expected in three years, E(4r1), is 6.10%. According to the liquidity premium theory, what is the liquidity premium on the 4-year Treasury Security (L4)?
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