Question: Keys Corporation's 5-year bonds yield 6.50%, and T-bonds with the same maturity yield 4.40%. The default risk premium for Keys' bonds is DRP = 0.40%,

Keys Corporation's 5-year bonds yield 6.50%, and T-bonds with the same maturity yield 4.40%. The default risk premium for Keys' bonds is DRP = 0.40%, the liquidity premium on Keys' bonds is LP = 1.70% versus zero on T-bonds, inflation premium (IP) is 1.5%, and the maturity risk premium (MRP) on 5-year bonds is 0.40%. What is the real risk-free rate, r*? a. 2.10% b. 2.20% c. 2.30% d. 2.40% e. 2.50%

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