Interest Rate Determination and Yield Curvesb.Finding the yield for each of the two investmentsReal isk$-$free rateExpected inflationExpected inflationExpected inflation thereafterMaturity risk premium $=$Liquidity premiumMaturity of treasury bondMaturity of corporate bondCorporate bond rating$12-$year Treasury BondReal risk$-$free rateInflation premiumMaturity risk premium$12-$year Treasury yieldRatingAAAAADRP $+$ LP$0\mathrm{.}10\%0\mathrm{.}42\%0\mathrm{.}80\%$EF$5\%2\%$ for the next$3\%$ for the following$4\%0\mathrm{.}03\%$xt $-1)0\mathrm{.}2\%12$ years$7$ yearsAAFormulas#N$/$A #N$/$A #N$/$A #N$/$A$2$ years$4$ years$7-$year Corporate BondReal risk$-$free rateInflation premiumMaturity risk premiumLiquidity premiumDefault risk premium$7-$year corporate yield#N$/$A #N$/$A #N$/$A #N$/$A #N$/$A #NIA