Question: Assuming annual compounding, determine the implied one-period forward rates2 (i.e. between year 1 and 2) and 3 (i.e. between year 2 and 3) in this

Assuming annual compounding, determine the implied one-period forward rates2 (i.e. between year 1 and 2) and 3 (i.e. between year 2 and 3) in this economy.What inference can you make about the market's estimate of the one-year spotinterest rate at =1 if the liquidity preference theory is correct?

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