Please answer the following, based on the information provided for the firm ABC: the company finances its operations and growth opportunities, using common equity, debt, and preferred equity. It issued a 15 year, 5 percent (coupon rate of 5%) bonds 5 years ago. This annual-coupon bond is currently selling for $1080, and its face value is $1000.

What comes closest to ABCs pre-tax cost of debt?

4%

3%

5%

6%

7%