Please solve part 1) B,C,D.

1. Based on forecasts, one-year T-bill rates and liquidity premiums for the next four years are expected to be as follows: 1R1=f1=5.65%E(2R1)=f2=6.75%E(3R1)=f3=6.85%E(4R1)=f4=7.15%L2=0.05%L3=0.10%L4=0.12% Answer the following questions: a) Using the liquidity premium hypotheses, plot the current yield curve. b) If 1R5=7% and E(5R1)=f5=7.50%, what is the liquidity premium for year 5 ? c) Compute and plot the par yield curve. d) What is the relationship between the forward yield curve, zero-coupon yield curve and par yield curves? 14