Galvatron Metals has a bond outstanding with a coupon rate of 6.7 percent and semiannual payments. The bond currently sells for $1,863 and matures in 21 years. The par value is $2,000 and the company's tax rate is 40 percent. What is the company's aftertax cost of debt?

Answers:

1. 4.67%

2. 3.67%

3. 4.41%

4. 3.43%

5. 4.07%