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You predict that the one-year rate one year from now is going to be 2%, and the one-year rate two years from now is going
You predict that the one-year rate one year from now is going to be 2%, and the one-year rate two years from now is going to be 3%. If the current one-year rate is 1%, what would be your predicted three-year rate based on the liquidity premium theory assuming that the liquidity premiums on one-year, two-year, and three-year bonds are 0%, 0.1%, and 0.2%, respectively.
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