A credit rating is quoting the following yield spread (in basis points i.e. 1 point = 0.01%):

Rating	1 yr	2 yr	3 yr	5 yr	7 yr	10 yr	30 yr
AAA	4	8	12	18	20	30	50
A	55	65	75	85	95	107	120

XYZ is considering the issue of $0.3 billion of debt with a maturity of three years.

Currently, the yield on one-year government securities is 3% and the yield on five-year

government securities is 4.5%. XYZ will have a credit rating of AAA after the debt issue.

Required

Calculate the cost of debt (pre-tax) for XYZ.