1. The following data is available from the term structure of
Interest rates.
Current yield to maturity on one year bonds = 1.5%
Current yield to maturity on two year bonds = 2%
Calculate the forward rate (f2) for year two.
2. A semiannual, 6 percent bond matures in 14 years and has a face value of $1,000. The market quote on this bond is 1,030. What is the aftertax cost of debt if the tax rate is 34 percent?
6.14 percent
5.56 percent
3.53 percent
3.75 percent