Contrail Air, Inc. is trying to determine its cost of debt. The company has an outstanding debt issue with 17years to maturity that is quoted at 97.00% percent of face value.The issue makes semiannual payments and has a coupon rate of 9.00% percent.What is the after tax cost of debt?

Settlement 01/01/2000

Maturity 01/01/2017

Price (% of par) 97

Coupon rate 9%

Payments per year 2

Tax rate 35%

Pretax cost 9.36%

6.08%

6.93%

14.39%

12.63%