David has incurred some debt and he would like for you to figure out what the cost of this debt is. With the information given below, what would be his cost? He sold a $1,000 par value, non-callable bond that now has 15 years to maturity and an 8.50% annual coupon that is paid semiannually. The bond that his has sells for $1,025 and his tax rate is 35%. Figure out the cost of debt so that David can calculate his WACC.

Please show formula and work.