Koy Corporation's 5-year bonds yield 12.50%. The real risk-free rate is 3.0%, the inflation premium for 5-year bonds is 1.75%, the liquidity premium for Koy's bonds is 0.75% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP = 0.1%(t 1), where t = number of years to maturity. What is the default risk premium on Koy's bonds?

5.94%

6.60%

7.26%

7.99%

8.78%