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Crockett Corporation's 5-year bonds yield 6.90%, and 5-year T-bonds yield 5.00%. The real risk-free rate is r=3.30%, the default risk premium for Crockett's bonds is

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Crockett Corporation's 5-year bonds yield 6.90%, and 5-year T-bonds yield 5.00\%. The real risk-free rate is r=3.30%, the default risk premium for Crockett's bonds is DRP =1.00% versus zero for T-bonds, the liquidity premium on Crockett's bonds is LP = 0.90% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP =(t1)0.1%, where t= number of years to maturity. What inflation premium (IP) is built into 5 -year bond yields? a. 1.70% b. 1.00% c. 1.30% d. 0.80% e. 1.26%

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