The real risk-free rate (r*) is 2.8% and is expected to remain constant. Inflation is expected to be 5% per year for each of the next four years and 4% 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 National Transmissions Corp.'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% 0.80% A 1.05% BBB 1.45% National Transmissions Corp. issues eight-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 8.80% O 9.85% 5.35% 09.15% Based on your understanding of the determinants of interest rates, if everything else remains the same, which of the following will be true? A BBB-rated bond has a lower default risk premium as compared to a AAA-rated bond. Higher inflation expectations increase the nominal interest rate demanded by investors