Back to Assignment Attempts: Keep the Highest: 12 4. Calculating interest rates Aa The real risk-free rate-) is 2.8% and is expected to reman onstant. Inflation is expected to be 7% per year for each of the next four years and 6% thereafter. The maturity risk premium (MRP) is determined from the formula: 0.1(-1)%, where t is the security's matur ty The liquidity premium LP on all Pellegrini Southern Inc.'s bonds is 1.05%. The following table shows the current relationship between bond ratings and default risk premiums (DRF) U.S. Treasury 0.30% I 1.05% Pellegrin' Southern Inc. issues eght-year, AA-rated bonds. What is the yield on one of these bonds? Disregar cross-product terms; that is, if aweraging is required, use the arithmetic avera 10.80% 0 11.85% 5.35% 11.15% Based on your understanding of the determinants of nterest rates, f everythng eise remains the same, which of the O A AAA-rated bond has less default risk than a Ba-rated bond. O The yield on a AA4-rated bond will be higher than the yied on a B-roted bond