Koy Corporation's 5-Year Bonds Yield 7

Koy Corporation's 5-year bonds yield 7.00%,and 5-year T-bonds yield 5.15%.The real risk-free rate is r* = 3.0%,the inflation premium for 5-year bonds is IP = 1.75%,the liquidity premium for Koy's bonds is LP = 0.75% versus zero for T-bonds,and the maturity risk premium for all bonds is found with the formula MRP = (t − 1) × 0.1%,where t = number of years to maturity.What is the default risk premium (DRP) on Koy's bonds?

A) 0.60%
B) 1.10%
C) 1.50%
D) 2.25%
E) 3.00%