Sentence Correction

145. Astronomers at the Palomar Observatory have discovered a distant supernova explosion, one that they believe is a type previously unknown to science.
(A) that they believe is
(B) that they believe it to be
(C) they believe that it is of
(D) they believe that is
(E) they believe to be of

I don't understand why the answer is E. Can help to explain?
I thought that we need "that" here, and is "of" compulsory here?

u can never use one and that together
either use one they believe
or that they believe

I am confused... when you say they after the supernova , won't that indicate supernovas..... There is a porblem of misplaced modifiers . i would go for B.....