Suppose we observe the following rates 1r1 52 1r2 59 and, Ask an Expert

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Suppose we observe the following rates: 1R1 = 5.2, 1R2 = 5.9, and E(2r1) = 5.2. If the liquidity premium theory of the term structure of interest rates holds, what is the liquidity premium for year 2? (Round your intermediate calculations to 5 decimal places and final answer to 2 decimal places. (e.g., 32.16))

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Financial Management, Finance

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