You are given the following data:

r* = real risk-free rate	4%
Constant inflation premium (IP)	7%
Maturity risk premium (MRP)	1%
Default risk premium for AAA bonds (DRP)	3%
Liquidity premium for long-term Treasury bonds (T-bonds) (LP)	2%

Assume that a highly liquid market does not exist for long-term T-bonds, and the expected rate of inflation is a constant. Given these conditions, the rate on long-term Treasury bonds is _____.

Select one:

a.

23 percent

b.

11 percent

c.

14 percent

d.

19 percent

e.

27 percent