40.

Crockett Corporation's 5-year bonds yield 7.50%, and 5-year T-bonds yield 5.65%. The real risk-free rate is r' - 3.50%, the default risk premium for Crockett's bonds is DRP - 0.95% versus zero for T-bonds, the liquidity premium on Crockett's bonds is LP - 0.90% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP - (t-1)0,2%, where tw number of years to maturity. What inflation premium (IP) is built into 5-year bond yields? O a. 0.95% b. 1.25% c. 1.75 d. 2.15% e. 1.6996