Calculate the post tax (25%) yield to maturity of the following bond:

- Market price 65.75

- Par 100

- Coupon 9%

- Redemption at par 10 years

If this is redeemed at market price then what would the cost of debt be?

2. A bank loan is 9% interest. What is the cost of debt to the company?

3. What is the cost of debt of an irredeemable bond that has a coupon of 4%, a par value of 100 and a market price of 110?

4. Complete the following:

As interest rates increase, bond prices __________. As interest rates decrease, bond prices ________________