Kay Corporation's 5-year bonds yield 5.35% and 5-year T-bonds yield 3.60%. The real risk-free rate is r* = 1.80%, the inflation premium for 5-year bonds is IP = 1.40%, the default risk premium for Kay's bonds is DRP = 1.30% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP = (t - 1) 0.1%, where t = number of years to maturity. What is the liquidity premium (LP) on Kay's bonds?

a. 0.45%

b. 1.75%

c. 0.85%

d. 0.75%

e. 1.35%