QUESTION $18$

Suppose that the $1-$year, $2-$year, $3-$year, and $4-$year spot rates are observed as follows: $r1=9\mathrm{.}7\%,r2=10\mathrm{.}2\%,r3=10\mathrm{.}9\%,r4=12\mathrm{.}3\%,$ What must be the expected return in year $4$ under the liquidity preference theory if the liquidity premium is $0\mathrm{.}49\%?$

a$.18\mathrm{.}63\%$

b$.16\mathrm{.}61\%$

c$.16\mathrm{.}12\%$

d$.18\mathrm{.}14\%$