The Long-Term Debt of Laurentide Union Bank Is Currently Selling

question 18

Multiple Choice

The long-term debt of Laurentide Union Bank is currently selling at 103.The issue matures in 20 years and pays an annual coupon of 8%.The corporate tax rate is 40%.What is the after-tax cost of debt for Laurentide Union?

• A)3.08%
• B)4.62%
• C)4.80%
• D)7.70%

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Definitions:

Eardrum

A thin membrane in the ear that vibrates in response to sound waves, playing a key role in hearing.

Stapes

A small stirrup-shaped bone in the middle ear, transmitting vibrations from the incus to the inner ear.

Convergent Evolution

The phenomenon where unrelated species develop comparable characteristics independently due to the necessity of adapting to analogous environments or ecological roles.

Homoplasious Trait

A characteristic shared by a set of species but not present in their common ancestor, often resulting from convergent evolution rather than shared ancestry.