Suppose that the interest rate on one$-$year bonds over the next five years are:

$5\%,6\%,7\%,6\%$ and $5\%.$ If the risk premiums were all zero, draw the yield

curve.

$($ii$)$ Suppose that the one$-$year interest rates over the next five years change to:

$5\%,4\%3\%,4\%$ and $5\%.$ How would your yield curve change if people

preferred shorter$-$term bonds over longer$-$term bonds?