The Gergen Group's $5-$year bonds yield $6\mathrm{.}85\%,$ and $5-$year T$-$bonds yield $4\mathrm{.}75\%.$ The real risk$-$free rate is $r^{**}=2\mathrm{.}7\%,$ the default risk premium for Gergen's bonds

is DRP $=0\mathrm{.}85\%$ versus zero for T$-$bonds, the liquidity premium on Gergen's bonds is $LP=1\mathrm{.}25\%,$ and the maturity risk premium for all bonds is found with the

formula MRP $=(t-1)0\mathrm{.}1\%,$ where $t=$ number of years to maturity. What is the inflation premium $($IP$)$ on $5-$year bonds?

Select the correct answer.

a$.1\mathrm{.}83\%$

b$.1\mathrm{.}29\%$

c$.2\mathrm{.}01\%$

d$.1\mathrm{.}47\%$

e$.1\mathrm{.}65\%$