The real risk-free rate (*) is 2.8% and is expected to remain constant. Inflation is expected to be 7% per year for each of the next four years and 6% thereafter. The maturity risk premium (MRP) is determined from the formula: 0.1(t-1)%, where t is the security's maturity. The liquidity premium (LP) on all BTR Warehousing's bonds is 1.05%. The following table shows the current relationship between bond ratings and default risk premiums (DRP): Default Risk Premium Rating U.S. Treasury AAA 0.60% AA 0.80% 1.05% 1.45% BTR Warehousing issues 9-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. 10.84% 11.89% 11.09% 5.45% Based on your understanding of the determinants of interest rates, if everything else remains the same, which of the following will be true? O A BBB-rated bond has a lower default risk premium as compared to an AAA-rated bond. The yield on an AAA-rated bond will be lower than the yield on an AA-rated bond. Note: Round each of the discounted values of the dividends to the nearest tenth decimal place before plotting it on the graph. You can mouse over the points in the graph to see their coordinates. Discounted Dividends FV of Dividends DMIDENDS ($) PV of Dividends 0 10 20 40 50 60 30 YEARS