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 three 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 Liukin Holdings Inc.'s bonds is 0.55 %. The following table shows the current relationship between bond ratings and default risk premiums (DRP): Rating Default Risk Premium U.S. Treasury AA 0.60% AA 0.80 % A 1.05% B 1.45% Liukin Holdings Inc. issues ten-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. 9.35% 5.05% 8.80% 8.45% Based on your understanding of the determinants of interest rates, if everything else remains the same, which of the following will be true? Q Seare Rating Default Risk Premium U.S. Treasury AAA 0.60% AA 0.80% A 1.05% BBB 1.45% Liukin Holdings Inc. issues ten-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. 9.35% 5.05% 8.80% 8.45% Based on your understanding of the determinants of interest rates, if everything else remains the same, which of the following will be true? A AAA-rated bond has less default risk than a BB-rated bond. The yield on a AAA-rated bond will be higher than the yield on a BB-rated bond