Pellham Company is using debt to finance a new expansion. It sold 2,000 10-year bonds with a $1,000 par value. The bonds had annual coupon rates of 9.8%, paid semiannually, and they are selling for $964.29. The bonds also required a 2.5% issuance fee. Pellham also obtained a 10-year $3.5 million loan with an annual interest rate of 5.7%. Pellham has a tax rate of 35%. What is the BEST estimate of Pellham's cost of debt?