Question: please do it correctly will upvote Question 10 We have the following information about the current and expected future one-year interest rates: Current one-year interest

please do it correctly will upvote Question 10 We have the

please do it correctly will upvote

Question 10 We have the following information about the current and expected future one-year interest rates: Current one-year interest rate = 0.05 Expected one-year interest rate next year = 0.07 Expected one-year interest rate after two years = 0.12 Market participants are risk averse. They require a liquidity premium of 0.01 to hold the two-year bonds and a liquidity premium of 0.02 to hold the three-year bonds. According to the liquidity preference theory, the current two-year interest rate is X and the current three-year interest rate is Y, where: OX= 0.06 & Y = 0.08 OX= 0.07 & Y = 0.10 O X = 0.06 & Y = 0.10 OX=0.07 & Y = 0.08 1 pts OX= 0.07 & Y = 0.12

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