The Coupon Rate on an Issue of Debt Is 8

question 10

Multiple Choice

The coupon rate on an issue of debt is 8%. The yield to maturity on this issue is 10%. The corporate tax rate is 31%. What would be the approximate after-tax cost of debt for a new issue of bonds?

• A) 5.28%
• B) 2.48%
• C) 6.90%
• D) 3.14%

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