To raise $3,500,000 to expand into new markets, a very successful laptop manufacturing company issued bonds in the market with a coupon rate of 7.00%, paying interest every 6 months, and redeemable in 17 years. They established a sinking fund to retire this debt on maturity and made equal deposits into the fund at the end of every half-year.

a. If the fund was earning 4.20% compounded semi-annually, calculate the periodic cost of the debt.

b. Calculate the book value of the debt after 11 years