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Yielding the right-of-way to a hot air balloon is essential for safe aerial navigation. According to the Federal Aviation Administration (FAA) regulations, balloons have the right-of-way over all other types of aircraft. This is primarily due to their slower speed and lack of maneuverability compared to other aircraft.

When a hot air balloon enters your flight area, maintaining a safe distance is crucial for avoiding potential collisions and ensuring both your safety and that of the occupants in the balloon. The hot air balloon's unpredictable flight path, driven by wind currents, makes it necessary for other aircraft to give them priority.

The other choices may create unsafe situations. For instance, maintaining altitude and proceeding could inadvertently lead to a collision if the balloon changes its position. Trying to fly above the balloon might not be viable due to altitude restrictions or the balloon's unpredictable movements. While notifying local authorities may be necessary in specific situations, it does not address immediate safety concerns in the airspace. Therefore, yielding the right-of-way is the most responsible action to take when encountering a hot air balloon.