The After-Tax Cost of Debt for a 20-Year,7 Percent,$1,000 Par

Multiple Choice

The after-tax cost of debt for a 20-year,7 percent,$1,000 par value bond selling at $960 (assume a marginal tax rate of 40 percent) is ________.

A) 5.84 percent
B) 4.43 percent
C) 1.55 percent
D) 5.53 percent