The real risk-free rate (r*) is 2.890 and is expected to remain constant. Inflation is expected to be 400 per year for each of the next three years and 3% 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 Gauge Imports Inc.'s bonds is 0.55%. The following table shows the current relationship between bond ratings and default risk premiums (DRP): Rating U.S. Treasury Default Risk Premium 0.60% 0.80% 1.05% 1.45% Gauge Imports Inc. issues 13-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. O 7.38% O 8.03% O 8.58% O 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? O A AAA-rated bond has less default risk than a BB-rated bond. O The yield on U.S. Treasury securities always remains static