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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

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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 five years and 4% thereafter. The maturity risk premlum (MRP) is determined from the formula: 0.1(t1)%, where t is the security's maturity, The liquidity premium (LP) on alf Sacramone Products Co,'s bonds is 1.05%. The following table shows the current relationship between bond ratings and default risk. premiums (DRP): Sacramone Products. Co. issues eleven-year, AA-rated bends. What is the yleld on one of these bonds? Disregard cross-product terms; that is, if averaging is required, use the arithmetic average, 9.05% 9.10% 10.10% 5.65% Based on your understanding of the determinants of interest rates, if everything eise remains the same, which of the following will be true? The yield on an. AAA-rated bond will be lower than the yicid on an AA-rated bond. The maturity risk premium (MRP) is determined from the formula: 0.1(t1)%, where t is the security's maturity. The llquidity premlum (LP) on all Sacramone Products Co.'s bonds is 1.05%. The following table shows the current relationship between bond ratings and default risk premiums (DRP): Sacramone Products Co. Issues eleven-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. 9.05%9.10%10.10%5.65% Based on your understanding of the determinants of interest rates, if everything else remains the same, which of the following will be true? The yeld on an AAA-rated bond will be lower than the yield on an AA-rated bond. The yield on an AMrated bond will be tilgher than the yeld on a b8-rated bond

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