Glasgow Corporation's 5-year bonds yield 6.2% and 5-year T-bonds yield 4.4%. 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 Glasgow'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 Glasgow's bonds? * A) 0.36%
B) 0.41%
C) 0.45%
D) 0.50%
E) None of the above