A few years ago the Kennette Company sold a $1,000 par value, non callable bond that now has 15 years to maturity and a 5.00% annual coupon that is paid semi annually. The bond currently sells for $920 and the company's tax rate is 40%. What is the component cost of debt for use in the WACC calculation? (Please show your work).
A) 1.74%
B) 2.32%
C) 3.48%
D) 5.81%
E) 6.96%