The real risk-free rate (r*) is 2.8% and is expected to remain constant. Inflation is expected to be 6% per year for each of the next two years and 5% 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 Berth Construction Inc.'s bonds is 1.05%. 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% 0.80% A 1.05% BBB 1.45% Berth Construction Inc. issues seven-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 9.94% O 9.49% 10.54% O 5.25% Based on your understanding of the determinants of interest rates, if everything else remains the same, which of the following will be true? In theory, the yield on a bond with a longer maturity will be higher than the yield on a bond with a shorter maturity. A BBB-rated bond has a lower default risk premium as compared to an AAA-rated bond