The real risk-free rate (ro) is 2.8% and is expected to remain constant. Inflation is expected to be 3% per year for each of the next five years and 2% thereafter. The maturity risk premium (MRP) is determined from the formula: 0.1( - 19%, where t is the security's maturity. The liquidity premium (LP) an all Pellegrin Southern Inc.'s bonds is 1.05%. The following table shows the current relationship between bond ratings and default risk premiums (ORP): Default Risk Premium Rating U.S. Treasury AAA AA 0.60% 0.80% 1.05% BBB 1.45% Pellegrini Southern Inc. issues 6-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. 6.93% 7.48% 5.15% 7.98% Based on your understanding of the determinants of interest rates, If everything else remains the same, which of the following will be true? O In theory, the yield on a bond with a longer maturity will be higher than the yield on a bond with a shorter maturity The yield on U.S. Treasury securities always remains static