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The real risk-free rate (r) is 2.9% and is expected to remain constant. Inflation is expected to be 5% per year for each of the

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The real risk-free rate (r") is 2.9% and is expected to remain constant. Inflation is expected to be 5% per year for each of the next three years and 4% thereafter The maturity risk premium (MRP) is determined from the formula: 0.1(0 - 1)%, where t is the security's maturity. The liquidity premium (LP) on all Lukin Holdings Inc.'s bonds is 0.55%. The following table shows the current relationship between bond ratings and default risk premiums (ORP): Default Risk Premium Rating U.S. Treasury AAA 0.60% AA 0.80% 1.05% BBB 1.45% Lukin Holdings Inc. issues ten-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. 9.35% 5.05% O 8.80% 8.45% Liukin Holdings Inc. Issues ten-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. 9.35% 5.05% 8.80% O 8.45% 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. The yield on a AAA-rated bond will be higher than the yield on a BB-rated bond

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