What is the net cost of the call premium

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Reference no: EM131310923

Buchanan Corp. is refunding $10 million worth of 10% debt. The new bonds will be issued for 8%. The corporation's tax rate is 35%. The call premium is 9%. What is the net cost of the call premium?

A. $390,000

B. $1,080,000

C. $585,000

D. $702,000

2. A bond with a coupon rate of 6.5%, maturing in 10 years at a value of $1,000 and current market price of $695 will have a current yield of

A. 11.3%

B. 10.2%

C. 9.4%

D. 8.5%

Reference no: EM131310923

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