4. Calculating interest rates Aa Aa The real risk-free rate (r*) is 2.8% and is expected to remain constant. Inflation is expected to be 8% per year for each of the next four years and 7% thereafter. The maturity risk premium (MRP) is determined from the formula: 0.1(t-1)%, where t is the security's aturity. The liquidity premium (LP) on all Harrington Horticulture Co.'s bonds is 0.55%. The following table shows the current relationship between bond ratings and default risk premiums (DRP): Rating Default Risk Premium U.S. Treasury 0.60% 0.80% 1.05% 1.45% Harrington Horticulture Co. issues six-year, AA-rated bonds. What is the yield on one of these bonds? Disregard cross-product terms; that is, if averaging is required, use the arithmetic average. O 11.77% O 12.32% O 4.65% O 11.82%