Rating	AAA	AA	A	BBB	BB	B	CCC
Average default rate	0.00%	0.20%	0.40%	0.60%	1.50%	4.50%	13.50%
Recession default rate	0.00%	0.50%	1.00%	2.40%	3.10%	15%	40%
Beta	0.04	0.07	0.07	0.1	0.15	0.23	0.3

Long Island Ltd. has a bond issue outstanding with a yield to maturity of 7%, and a bond rating of A. The expected loss rate in the event of default is 50%. If the economy is in recession, then the expected cost of debt for Long Island Ltd. should be

a. 4% b. 6.5% c. 2% d. 4.5%