Kay Corporation's 5-year bonds yield 5.90% and 5-year T-bonds yield 4.40%. The real risk-free rate is r* = 2.5%, the inflation premium for 5-year bonds is IP = 1.50%, the default risk premium for Kay's bonds is DRP = 1.30% 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 liquidity premium (LP) on Kay's bonds?
0.1%, where t = number of years to maturity. What is the liquidity premium (LP) on Kay's bonds?A. 0.23%
B. 0.25%
C. 0.19%
D. 0.20%
E. 0.17%
Answer: D
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