Company pretax cost of debt and aftertax cost of debt

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Reference no: EM131956480

A security will make payments of $25 per month, plus $1000 at maturity. The price of this security is $2000. Which of the following is true?

If the time to maturity is 7 years then the period rate is 0.84%

If the time to maturity is 4 years then the yield to maturity is 3.34%

If the time to maturity is 7 years then the yield to maturity is 0.84%

If the time to maturity is 4 years then the period rate is 10.05%

If the time to maturity is 4 years then the yield to maturity is 10.05%

Advance, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 14 years to maturity that is quoted at 105 percent of face value. The issue makes semiannual payments and has a coupon rate of 4 percent.

What is the company's pretax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Pretax cost of debt % If the tax rate is 35 percent, what is the aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Reference no: EM131956480

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