A $1,000 par bond is currently selling for $1,100.It has a 9% coupon rate,fifteen years remaining to maturity,and pays interest semi-annually.If the firm's tax rate is 35%,what is the after-tax cost of debt?

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Step 1 - Use a financial calculator to solve for the pre-tax cost of debt. PV = -1,100, FV = 1,000, PMT = 45, N = 30, CPT I/Y = 3.927 × 2 = 7.85% Step 2 - Account for taxes. k_d 11ea7fdb_fc6a_1f06_a768_7f808f576271_TB2902_11 7.85%(1 - .35) = 5.10%

A $1,000 Par Bond Is Currently Selling for $1,100