Calculate the yield to maturity of a bond that has an after-tax cost of debt of...

Question

Question

Calculate the yield to maturity of a bond that has an after-tax cost of debt of 10%, assuming the tax rate is 21%.

Answer 1

Answer #1

YTM is before tax

so we have to calculate before tax cost of debt

After tax cost of debt = Before tax cost of debt*(1-t)

10% = Before tax cost of debt *(1-0.21)

Before tax cost of debt = 10%/ (1-0.21) = 12.6582% = 12.66%

Answer : YTM = 12.66% [Thumbs up please]

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Answer 2

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