Webb Street Books Has a $130,000 Bond Issue Outstanding

Multiple Choice

Webb Street Books has a $130,000 bond issue outstanding. These bonds have an 8% coupon, pay interest semiannually, and have a current market price equal to 101.5% of face value. The tax rate is 35%. What is the amount of the annual interest tax shield?

A) $3,515
B) $3,640
C) $4,480
D) $5,920
E) $6,760