Western Gas & Electric Company (WGC) can borrow funds at an interest rate of 11.10% for a period of five years. Its marginal federal-plus-state tax rate is 25%. WGCs after-tax cost of debt is (rounded to two decimal places).

At the present time, Western Gas & Electric Company (WGC) has 5-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,438.04 per bond, carry a coupon rate of 14%, and distribute annual coupon payments. The company incurs a federal-plus-state tax rate of 25%. If WGC wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two decimal places)? (Note: Round your YTM rate to two decimal place.)

3.10%

2.48%

3.72%

2.79%