Drongo Corporations 3-year bonds currently yield 4.9 percent and have an inflation premium

of 1.3%. The real risk-free rate of interest, r*, is 2.3 percent and is assumed to be constant.

The maturity risk premium (MRP) is estimated to be 0.1%(t - 1), where t is equal to the time to

maturity. The default risk and liquidity premiums for this companys bonds total 1.1 percent

and are believed to be the same for all bonds issued by this company. If the average inflation

rate is expected to be 4.2 percent for years 4, 5, and 6, what is the yield on a 6-year bond for

Drongo Corporation?

Group of answer choices

6.65%

6.75%

6.95%

6.85%

6.55%