Suppose you are considering two possible investment opportunities: a $12-$year Treasury bond and a $7-$year, AA$-$rated corporate bond. The current real risk$-$free rate is $4\%,$ 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 $=0\mathrm{.}03(t-1)\%.$ 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$.$

$\backslash$table$[[,$Rate,$\backslash$table$[[$Corporate Bond Yield$],[$Spread $=$ DRP $+$ LP$]]],[$U$.$S$.$ Treasury,$0\mathrm{.}83\%,-],[$AAA corporate,$0\mathrm{.}93,0\mathrm{.}10\%$