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David Abbot is interested in purchasing a bond issued by Sony. He has obtained the following information: Par Value- $1,000 Cost- $910 Coupon interest rate-

David Abbot is interested in purchasing a bond issued by Sony. He has obtained the following information:

Par Value- $1,000

Cost- $910

Coupon interest rate- 7.5%

Years to maturity: 10

Corporate tax rate- 35%

a. The before tax cost of the Sony bond using the bond's yield to maturity (YTM) is ___ %?

b. The after tax cost of the Sony bond given the corporate tax rate is ___ %?

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