Before-tax cost of debt and after-tax cost of debtDavid Abbot is buying a new house, and he is taking out a30-year

mortgage. David will borrow 209,000 from a bank, and to repay the loan he will make 360

monthly payments (principal and interest) of 1,306.76 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 30% tax bracket.

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

b. The after-tax interest rate that David is paying is