Rinsemator Group issues $7-$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.

$10\mathrm{.}77\%$

$11\mathrm{.}82\%$

$5\mathrm{.}25\%$

$11\mathrm{.}22\%$

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.

The yield on an AAA$-$rated bond will be lower than the yield on an AA$-$rated bond.