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The coupon rate on an issue of debt is 9%. The yield to maturity on this issue is 10%. The corporate tax rate is 38%.

The coupon rate on an issue of debt is 9%. The yield to maturity on this issue is 10%. The corporate tax rate is 38%. What would be the approximate after-tax cost of debt for a new issue of bonds? (Round your answer to 2 decimal places.)

Multiple Choice

6.20%

4.85%

7.65%

8.35%

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