The coupon rate on an issue of debt is 8%. The yield to maturity on this issue is 10%. The corporate tax rate is 21%. What would be the approximate after-tax cost of debt for a new issue of bonds?
A) 5.28%
B) 2.48%
C) 7.9%
D) 3.14%

Name: The coupon rate on an issue of debt is 8%. The yield to maturity on this issue is 10%. The corporate tax rate is 21%. What would be the approximate after-tax cost of debt for a new issue of bonds? A) 5.28% B) 2.48% C) 7.9% D) 3.14%
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Question

Quizplus · Accepted Answer

K_d = 10%(1 − 0.21) = 7.9%

The Coupon Rate on an Issue of Debt Is 8