Quand Co.'s common stock sells for $31.00, pays a dividend of $1.80, and has an expected long-term growth rate of 6.5%. The firm's straight-debt bonds yield a 10.20% return. Quaid is planning a convertible bond issue. The bonds will have a 20-year maturity, pay a 9.40% annual coupon, have a par value of $1,000, and a conversion ratio of 25 shares per bond. The bonds will sell for $1,000 and will be callable after 10 years. Assuming that the bonds will be converted at Year 10, when they become callable, what will be the expected return on the convertible when it is issued? Do not round your intermediate calculations.

a. 9.4%

b. 11.99%

c. 9.27%

d. 11.85%

e. 9.08