As investment manager of Pasco Electric Company (which is exempt from income tax ) , you must choose between IBM bonds and preferred shares of AT & T. The bonds have a par value of $ 1,000, maturing in 20 years, they pay $ 40 every six months and are sold at a price of $ 897.40 each. The preferred shares are perpetual , they paid a dividend of $ 2 each quarter and sold at $ 95 per share. What is the effective annual yield ( EAR ) on the title of highest performance?
a. 7.82%
b. 7.90%
c. 8.20%
d. 8.69%