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 two years and 7% 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 BTR warehousing's bonds is 0.55%. The following table shows the current relationship between bond ratings and default risk premiums (DRP): BTR warehousing 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. 11.55% 11.40% 12.10% 4.85% Based on your understanding of the determinants of interest rates, if everything else remains the same, which of the following will be true? The yield on a AAA-rated bond will be higher than the yield on a BB-rated bond. Higher inflation expectations increase the nominal interest rate demanded by investors