Fashion Wear has bonds outstanding that mature

| March 13, 2016

Fashion Wear has bonds outstanding that mature in 12 years, pay interest annually, and have a coupon rate of 7.5 percent. These bonds have a face value of $1,000 and a current market price of $1,060. What is the company’s aftertax cost of debt if its tax rate is 35 percent?
6.50 percent
6.85 percent
5.53 percent
4.39 percent
5.21 percent

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