What is the liquidity premium for the given year

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Question: Suppose we observe the following rates: 1R1 = 0.75%, 1R2 = 1.25%, and E(2r1) = 0.919%. If the liquidity premium theory of the term structure of risk-free rates holds, what is the liquidity premium for year 2, L2? (Do not round intermediate calculations and round your answer to 3 decimal places.)

Reference no: EM131889959

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