Before-tax cost of debt and after-tax cost of debt David Abbot is buying a new house, and he is taking out a 30-year mortgage. David will borrow $202,000 from a bank, and to repay the loan he will make 360 monthly payments (principal and interest) of $1,181.38 per month over the next 30 years. David can deduct interest payments on his mortgage from his taxable income, and based on his income, David is in the 32% tax bracket.

1. What is the before-tax interest rate (per year) on David's loan?
2. What is the after-tax interest rate that David is paying?

a. The before-tax interest rate (per year) on David's loan is

%. (Round to two decimal places.)

Before-tax cost of debt and after-tax cost of debt David Abbot is buying a new house, and he is taking out a 30 -year mortgage. David will borrow $202,000 from a bank, and to repay the loan the will make 360 monthly payments (principal and interest) of $1,181.38 per month over the next 30 years. David can deduct interest payments on his mortgage from his taxable income, and based on his income, David is in the 32% tax bracket. a. What is the before-tax interest rate (per year) on David's loan? b. What is the after-tax interest rate that David is paying? a. The before-tax interest rate (per year) on David's loan is y. (Round to two decimal places.)