National Corporation has semiannual bonds outstanding with nine years to maturity and the bonds are currently priced at $754.08. If the bonds have a coupon rate of 7.25 percent, then what is t

he after-tax cost of debt for Beckham if its marginal tax rate is 30 percent? Solution

• Number of periods = 9 * 2 = 18

  Coupon = (0.0725 * 1000) / 2 = 36.25

  Yield to maturity = 11.7499%

  Keys to use in a financial calculator: 2nd I/Y 2, FV 1000, PMT 36.25, PV -754.08, N 18, CPT I/Y

  After tax cost of debt = YTM (1 - tax)

  After tax cost of debt = 0.117499 (1 - 0.3)

  After tax cost of debt = 0.0822 or 8.22%

HOW DID THEY FIND THE Yield to maturity = 11.7499%

HOW CAN I DO THIS PROBLEM BY HAND STEP BY STEP OR BY FINANCE CALCULATOR STEP BY STEP ?? PLEASE HELP