Homework Answers
Option b
Using financial calculator
Input: FV= 1000
N=20*2 = 40
PMT=9%*1000/2 = 45
PV = -930.41
Solve for I/Y as 4.9
YTM=4.9%*2 = 9.8%
After tax cost of debt = YTM*(1-tax rate) =
=9.8%*(1-25%)
= 7.35%
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