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Kern Corporation's 5-year bonds yield 7.50% and 5-year T-bonds yield 4.30%. The real risk-free rate is r* - 2.5%, the default risk premium for Ker's

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Kern Corporation's 5-year bonds yield 7.50% and 5-year T-bonds yield 4.30%. The real risk-free rate is r* - 2.5%, the default risk premium for Ker's bonds is DRP = 1.90% versus zero for T-bonds, the liquidity premium on Kern's bonds is LP - 1.3%, and the maturity risk premium for all bonds is found with the formula MRP-(t-1)x0.1%, wheret number of years to maturity. What is the inflation premium (IP) on all 5-year bonds? a. 1.06% . 1.64% 1.32% O d. 1.40% e 1.19%

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