Question: Suppose that the current and expected future short-term interest rates are given by: And suppose that the liquidity premiums on bonds with maturity on 1

 Suppose that the current and expected future short-term interest rates are

Suppose that the current and expected future short-term interest rates are given by: And suppose that the liquidity premiums on bonds with maturity on 1 through 3 years are: Find the yields i_2t and i_3t on the 2-. 3-, 4-, and -5-year bonds implied by the expectations theory. Find the yields i_2t and i_3t on the 2-. 3-, 4-, and -5-year bonds implied by the liquidity premium theory. Plot the yield curves that are implied by the expectations and liquidity preference theories

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