Sweet company has 15,000 semiannual coupon bonds outstanding with 20 years left to maturity. Bonds are currently trading at $1,325 with a 8.5% coupon rate. The bonds have a $1,000 par value. Calculate the after-tax cost of debt given that the corporate tax rate is 35%.

a. 1.87%

b. 3.45%

c. 3.73%

d. 5.70%

e. 2.87%