Attempts: 1 Average: 12 3. Calculating Interest rates The real risk-free rate (*) is 2.80% and is expected to remain constant into the future. Inflation is expected to be 6.80% per year for each of the next two years and 5.60% thereafter. The maturity risk premium (MRP) is determined from the formula: 0.10 x (t-1)%, where is the security's maturity. The liquidity premium (LP) on all Sacromone Products Co.'s bonds is 0.60%. The following table shows the current relationship between bond ratings and default risk premiums (DRP): Rating Default Risk Premium U.S. Treasury AAA 0,60% 0. 1.05% BBB 1.45% Sacramone Products Co. issues seven-year, AA-rated bonds. What is the yield on one of these bonds? (Hint: Disregard cross product terms; that is averaging is required, use an arithmetic average.) 4.80% 10.74% 10.14 Based on your understanding of the determinants of interest rates, if everything else remains the same, which of the following will be true