b$.$ Suppose you are considering two possible investment opportunities: a $12-$year Treasury bond and a $7-$year, A$-$rated corporate bond. The current real risk$-$free rate is $3\%,$ and inflation is expected to be $2\%$ for the

next $2$ years, $3\%$ for the following $4$ years, and $4\%$ thereafter. The maturity risk premium is estimated by this formula: MRP $=0\mathrm{.}01(t-1)\%.$ The liquidity premium $($LP$)$ for the corporate bond is estimated to be

$0\mathrm{.}2\%.$ You may determine the default risk premium $($DRP$),$ given the company's bond rating, from the following table. Remember to subtract the bond's LP from the corporate spread given in the table to arrive at

the bond's DRP$.$

What yield would you predict for each of these two investments? Round your answers to three decimal places.

$12-$year Treasury yield:

$\%$

$7-$vear Corporate vield