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 three years and 7% thereafter. The maturity risk premium (MRP) is determined from the formula: 0.1(t1)%, where t is the security's maturity. The liquidity premium (LP) on all Harrington Horticulture Co.'s bonds is 1.05%. The following table shows the current relationship between bond ratings and default risk premiums (DRP): Harrington Horticulture Co. issues 8-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. 11.68% 12.03%12.73%5.35% 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 an AAA-rated bond. In theory, the yield on a bond with a longer maturity will be higher than the yield on a bond with a shorter maturity