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Assume that 4-year Treasury Bonds currently have a nominal yield of 6

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Assume that 4-year Treasury Bonds currently have a nominal yield of 6.2%, and a 4-year
Corporate Bonds have a nominal yield of 8.5%. If Maturity Risk Premium (MRP) on all 4-year
contracts currently is 1.3%, and Corporate Bonds currently have additional 0.4% Liquidity Risk
Premium (LRP) (whereas Treasury Bonds do not have Liquidity Risk Premium), what is the
current Default Risk Premium (DRP) on the Corporate Bonds?

A. 2.3%

B. 1.0%

C. 1.9%

D. 4.5%

E. 4.9%