Several years ago the Jakob Company sold a $1,000 par value, noncallable bond that now has 20 years to maturity and a 7.00% annual coupon that is paid semiannually. The bond currently sells for $875, and the company's tax rate is 40%. What is the component cost of debt for use in the WACC calculation? Do not round your immediate calculations.

a. 4.58%

b. 4.97%

c. 3.78%

d. 4.92%

e. 5.87%