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 is the security's maturity. The liquidity premium (LP) on all Berth Construction Inc.'s bonds is 0.55%. The following table shows the current relationship between bond ratings and default risk premiums (DRP): Default Risk Premium Rating U.S. Treasury AAA AA 0.60% 0.80% 1.05% BBB 1.45% Berth Construction Inc. issues 10-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. 11.90% 11.55% 5.05% 12.45% Based on your understanding of the determinants of interest rates, if everything else remains the same, which of the following will be true? An AAA-rated bond has less default risk than a BB-rated bond. The yield on U.S. Treasury securities always remains static