Problem
1. Cost of debt. An outstanding bond has a $1000 face value, a 9.5 percent annual coupon, and 10 more years until it matures. The bond currently sells for $1153. What are the historical after-tax cost of debt and the current after-tax cost of debt? Assume a 40 percent tax rate.
2. Capital asset pricing model. What is the expected return on asset X if it has a beta of 0.85, the expected market return is 11.50 percent, and the risk-free rate is 5.75 percent?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.