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The YTM on a one-year zero coupon bond is 7%. The YTM on a two-year zero coupon bond is 8% The estimated liquidity premium is
The YTM on a one-year zero coupon bond is 7%. The YTM on a two-year zero coupon bond is 8% The estimated liquidity premium is 0.5%. If the liquidity preference theory holds true, what is the current market expectation of 1 year zero coupon rate one year from now?
answer : 8.51%
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