short term one year interest years over the next 6 years will be 14 09
Short term (one year) interest years over the next 6 years will be 1.4, 0.9, 1.2, 1.2, 2.7, and 1. Assume that the investors prefer holding short-term bonds so that liquidity premium of 10 basis points is required for each year of bond maturity. Using the liquidity premium theory, what will be the interest rates on 5-year bonds?
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