ABC Company can privately place an issue of $1,000 face value, 30-year bonds. The bonds would carry an 8.75% interest coupon paid annually. Investors would purchase this investment at $1,050. Since the issue would be privately placed, there would be no flotation cost. ABC Company is in the 35% marginal income tax bracket.

Question3: What is rb, the required rate of return at which the investor is willing to purchase this new bond issue?