The real risk-free rate (r) is 2.80% and is expected to remain constant into the future. Inflation is expected to be 7.50% per year for each of the next three years and 6.30% thereafter. The maturity risk premium (MRP) is determined from the formula: 0.10 x (t-1)%, where t is the security's maturity. The liquidity premium (LP) on all Global Satellite Corp.'s bonds is 0.60%. The following table shows the current relationship between bond ratings and default risk premiums (ORP): Rating Default Risk Premium U.S. Treasury AAA 0.60% AA 0.80% 1.05% BBB 1.45% Global Satellite Corp. issues eight-year, AA-rated bonds. What is the yield on one of these bonds? (Hint: Disregard cross-product terms; that is, if averaging is required, use an arithmetic average.) O 11.65% 4.90% @ 10.95% 11.05% 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. Grade It Now Save & Cc