3. Calculating interest rates The real risk-free rate (r) is 2.8% and is expected to remain constant. Inflation is expected to be 3% per year for each of the next two years 2% hereafter. The maturity risk premium (MRP) is determined from the formula: 0.1(t1)%, where t is the security's maturity. The liquidity premium (LP) on all Global Satellite Corp.'s bonds is 1.05%. The following table shows the current relationship between bond ratings and default risk premiums (DRP) Global Satellite Corp. issues twelve-year, AA-rated bonds. What is the yield on one of these bonds? Disregard cross-product terms; that is, if averaging s required, use the arithmetic average. 6.87%6.82%7.92%5.75% Based on your understanding of the determinants of interest rates, if everything else remains the same, which of the following will be true? The yield on U.S. Treasury securities always remains static. An AAA-rated bond has less default risk than a BB-rated bond