Kop Corporation's 5-Year Bonds Yield 6

Kop Corporation's 5-year bonds yield 6.50%,and T-bonds with the same maturity yield 3.40%.The default risk premium for Kop's bonds is DRP = 0.40%,the liquidity premium on Kop's bonds is LP = 2.70% versus zero on T-bonds,the inflation premium (IP) is 1.50%,and the maturity risk premium (MRP) on 5-year bonds is 0.40%.What is the real risk-free rate,r*?

A) 1.14%
B) 1.83%
C) 1.82%
D) 1.19%
E) 1.50%