Berth Construction Inc. issues nine$-$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.

$7\mathrm{.}21\%$

$8\mathrm{.}01\%$

$6\mathrm{.}96\%$

$5\mathrm{.}45\%$

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 an AAA$-$rated bond.

Higher inflation expectations increase the nominal interest rate demanded by investors.