Suppose the inflation rate is expected to be 7% next year, 5% the following year, and 3% thereafter, Assume that the real risk-free rate, r, will remain at 2% and that maturity risk premiums on Treasury securities rise from zero on very short-term bonds (those that mature in a few doys) to 0.2% for 1 -year securities. Furthermore, maturity risk premiums increase 0.2% for each year to maturity, up to a limit of 1.0% on 5 -year or longer-term T-bonds, a. Calculate the interest rate on 12,3,4,510, and 20 -year Treasury securities, Round your answers to two decimal places. Select the correct yieid curve based on these data. B D 10 I Interest Rate (\%) b. Suppose a AAA-rated company (which is the highest bond rating a firm can have) had bonds with the same maturities as the Treasury bonds. Estimate what you believe a AAA-rated company's yield curve woold look like on the same graph with the Treasury bond yield curve. (Hint: Think about the default risk. premium on its long-tem versus its short-term bonds.) The yield risk curve for the AA-rated corporate bonds will the yield curve for the Treasury securities. c. What will be the approximate yleld curve of a much riskier lower-rated company with a much higher risk of defauting on its bonds? The yield risk curve of a much riskier lower-rated company will be the yield curve for the Treasury securities and the yield curve for the AAA-rated corporate bonds