Nitreca Chemicals 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.

$8\mathrm{.}80\%$

$8\mathrm{.}45\%$

$5\mathrm{.}05\%$

$9\mathrm{.}35\%$

Based on your understanding of the determinants of interest rates, if everything else remains the same, which of the following will be true?

The yield on an AAA$-$rated bond will be higher than the yield on a BB$-$rated bond.

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