TDT Ltd is currently financed by 60% of equity and 40% of debt. Companys bond is traded ata price of $980. The bond has 10 year term, 8% coupon rate paid semi-annually and face value of $1,000. In addition, companys equity has a beta of 1.2 while the risk-free rate in the market is 3% and market portfolio return is estimated to be 12%.

1. Determine cost of debt ?