The liquidity premium theory holds

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Reference no: EM131078066

The current rate on a five-year Treasury is 6.44%. The current rate on a six-year Treasury is 7.01%. The liquidity premium in year 5 (L5) is 0.15% and the liquidity premium in year 6 (L6) is 0.25%. If the liquidity premium theory holds, what does the market expect the one-year interest rate to be in 5 years?

Reference no: EM131078066

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