Kop Corporation's 5-year bonds yield 6.70%, and T-bonds with the same maturity yield 4.75%. The default risk premium for Kop's bonds is DRP = 0.40%, the liquidity premium on Kop's bonds is LP = 1.55% versus zero on T-bonds, the inflation premium (IP) is 1.25%, and the maturity risk premium (MRP) on 5-year bonds is 0.40%. What is the real risk-free rate, r*?

a. 1.55%

b. 4.35%

c. 3.50%

d. 2.70%

e. 3.10%