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# If a one-year bond currently yields 4% and is expected to yield 6% next year, the liquidity premium theory suggests the yield today on a two-year...

If a one-year bond currently yields 4% and is expected to yield 6% next year, the liquidity

premium theory suggests the yield today on a two-year bond will be:

a. More than 4% but less than 5%.

b. 5%.

c. 4%.

d. More than 5%.

A borrower who has to pay an interest rate of 8% rather than 6% due to risk spread will pay:

a. $20 more in interest annually for every $100 borrowed.

b. 33.3% higher interest in dollar terms.

c. 2% in net interest.

d. less interest in total over the life of the loan.

a. 10,201.0

b. 9,805.0

c. 9,812.5

d. 9800. 0

please show your work, thank you.