Several years ago the Jakob Company sold a $1,000 par value, noncallable bond that now has 20 years to maturity and a 4.00% annual coupon that is paid semiannually. The bond currently sells for $775, and the company's tax rate is 25%. What is the component cost of debt for use in the WACC calculation? Do not round your intermediate calculations.

a. 5.40%

b. 5.94%

c. 2.97%

d. 4.45%

e. 3.19%