3 Liquidity premium theory You are given a set of five bonds whose cash flows and prices are given as follows. Note that their debt to maturity is different from 1 to 5 years. 3 3 3 3 103 100 3.5 3.5 3.5 103.5 0 100 Cash Flow 4 4 104 0 0 and Current Price = 100 4.5 104.5 0 0 0 100 105 0 0 0 0 100 1. Calculate the yield to maturity for the five bonds. 2. Draw the yield curve