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Determine the cost of debt with an outstanding debt issue

Determine the cost of debt with an outstanding debt issue and 18 years to maturity that is quoted at 97.00% of face value. Semiannual payments are made and has a coupon rate of 10.00%. What is the pretax cost of debt?

Settlement 01/01/2000

Maturity 01/01/2018

Price (% of par) 97

Coupon rate 10%

Payments per year 2

Tax rate 34%

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Finance Basics: Determine the cost of debt with an outstanding debt issue

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