SWH Corporation issued bonds on January 1, 2004. The bonds had a coupon rate of 6.5%, with interest paid semiannually. The face value of the bonds is $1,000 and the bonds mature on January 1, 2019. What is the intrinsic value of an SWH Corporation bond on January 1, 2010 to an investor with a required return of 7%?

a) $954.46

b) $967.03

c) $1,000

d) $1,033.28

Waverly corp is undergoing a major expansion. the expansion will be financed by issuing new 25 year, $1,000 par, 6% semiannual coupon bonds. The market price of the bonds is $975 each. Waverly floatation expense on the new bonds will be$75 per bond. What is the pre-tax cost of debt for the newly issued bonds?

a) 6.84%

b) 7.32%

c) 8.13%

d) 9.45%