The real risk-free rate (r) is 2.80% and is expected to remain constant into the future. Inflation is expected to be 6.80% per year for each of the next three years and 5.60% 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 National Transmissions Corp.'s bonds is 0.50%. The following table shows the current relationship between bond ratings and default risk premiums (DRP): Rating Default Risk Premium U.S. Treasury AAA 0.60% AA 0,80% A 1.05% BBB 1.45% National Transmissions Corp. issues ten-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.) 10.46% 10.96% 10.06% 5.00% 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 a AAA-rated bond. A AAA-rated bond has less default risk than a BB-rated bond