A developer is financing the construction of a mid-rise multifamily structure that will be sold at the end of ten years. The developer's goal is to collect rent from the multifamily structure for ten years after construction and then flip (i.e., sell) the property. Construction of the multifamily structure will take approximately 2 years to complete. The developers cannot collect rent while the mid-rise is being constructed. This, the developer decides to take out an interest-only loan with a two-year maturity at an interest rate of 5% to finance the construction costs and avoid having to pay the amortization component of a counterfactual 30-year fixed-rate mortgage. Furthermore, the developer plans to refinance the interest-only mortgage when the outstanding loan balance becomes due. The balloon mortgage will feature a 30-year amortization schedule at an annual interest rate of 4.5% but with a maturity of 10 years. To construct the multi-family structure, the developer needs $8.5 million. What is the developer's combined effective cost of borrowing? Assuming the loan will be held to maturity. For simplicity, ignore upfront refinancing costs (e.g., points).

A. 4.6%

B. 4.7&

C. 4.8%

D. 4.9%