A small firm without a credit rating needs to estimate its cost of debt from a synthetic credit rating. EBIT is 1200 and interest is 450. The risk free rate is 0.68.

If interest coverage ratio is
greater than	to	Rating is	Spread is
-100000	0.499999	D2/D	28.34%
0.5	0.799999	C2/C	21.26%
0.8	1.249999	Ca2/CC	16.20%
1.25	1.499999	Caa/CCC	15.37%
1.5	1.999999	B3/B-	9.65%
2	2.499999	B2/B	7.90%
2.5	2.999999	B1/B+	6.58%
3	3.499999	Ba2/BB	4.50%
3.5	3.9999999	Ba1/BB+	3.75%
4	4.499999	Baa2/BBB	3.13%
4.5	5.999999	A3/A-	2.44%
6	7.499999	A2/A	2.16%
7.5	9.499999	A1/A+	1.96%
9.5	12.499999	Aa2/AA	1.57%
12.5	100000	Aaa/AAA	1.26%

Group of answer choices

7.26

6.58

29.02