Omni Consumer Products Company (OCP) can borrow funds at an interest rate of 10.20% for a period of five years. Its marginal federal-plus-state tax rate is 30%. OCPs after-tax cost of debt is (rounded to two decimal places).

At the present time, Omni Consumer Products Company (OCP) has 15-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,136.50 per bond, carry a coupon rate of 12%, and distribute annual coupon payments. The company incurs a federal-plus-state tax rate of 30%. If OCP wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two decimal places)? (Note: Round your YTM rate to two decimal place.)

8.20%

6.42%

8.56%

7.13%