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18 of 55 Koy Corporation's 5-year bonds yield 8.10%, and 5-year T-bonds yield 5.20%. The real risk-free rate is r* 3.30%, the inflation premium for

18 of 55 Koy Corporation's 5-year bonds yield 8.10%, and 5-year T-bonds yield 5.20%. The real risk-free rate is r* 3.30%, the inflation premium for 5-year bonds is IP- 1.50%, the liquidity premium for Koy's bonds is LP = 0.75% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP -(1-1) x 0.1%, where t number of years to maturity. What is the default risk premium (DRP) on Koy's bonds? a. 2.15% b. 2.90% c. 1.75% d. 2.50% Oe. 3.65% Icon Key

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