You are considering investing in Blackmores, a pharmaceutical companys long-term debt. You require a credit risk premium of 3.5%, and a maturity risk premium of 1.5%. The long-term inflation rate is 2%, the risk-free rate of return is 3% and Blackmores shareholders require a 2% premium above what creditors earn. Given such information, what would be an appropriate total rate of return suitable for Blackmores long-term debt?

a.

8%

b.

10%

c.

12%

d.

11%