Blue Hamster Manufacturing $($BHM$)$ can borrow funds at an interest rate of $10\mathrm{.}20\%$ for a period of eight years. Its marginal federal$-$plus$-$state tax rate

is $30\%,$ BHM$\text{'}$s after$-$tax cost of debt is

$($rounded to two decimal places$).$

At the present time, Blue Hamster Manufacturing $($BHM$)$ has a$-$series of fifteen$-$year noncallable bonds with a face value of $$1,000$ that are

outstanding. These bonds have a current market price of $$1,136\mathrm{.}50$ per bond, carry a coupon rate of $12\%,$ and distribute annual coupon payments.

The company incurs a federal$-$plus$-$state tax rate of $30\%.$ If BHM wants to issue new debt, what would be a reasanable estimate for its after$-$tax cost

of debt $($rounded to two decimal places$)?$

$7\mathrm{.}13\%$

$5\mathrm{.}70\%$

$8\mathrm{.}20\%$

$6\mathrm{.}42\%$