Before-tax cost of debt andafter-tax cost of debtPersonal Finance ProblemDavid Abbot is interested in purchasing a bond issued by Sony. He has obtained the following information on thesecurity:

Sony Bond

Par value $1000

Coupon interest rate 8.0

8.0%

Corporate tax rate 25

25%

Cost$900

900

Years to maturity 10

Answer the followingquestions:

a.Calculate the before-tax costof the Sony bond using thebond's yield to maturity(YTM).

b.Calculate the after-tax costof the Sony bond given the corporate tax rate.