with formula

1. You buy a three-year bond which offers an annual coupon of 10 per cent for the next three years, with the first payment in one year. The bond will be redeemed at par (100) in three years. If you paid 105 what yield to maturity would you obtain? 2. A 100 bond with two years to maturity and an annual coupon of 9 per cent is available. (The next coupon is payable in one year.) The market price is 98. a) What yield to maturity does it offer? b) Assuming the company pays tax at a rate of 30%, what is the cost of debt after tax for the company supplying this bond? 3. The government issues a 10-year gilt with a par value of 100 and an (annual) coupon of 9 per cent, what yield to maturity is the bond offering if it is sold for 105 ? 4. Explain why we sometimes need to calculate the cost of debt after tax. Use any example calculations that you feel would assist your explanation. NB. Yield to maturity means the return on the bond. This is the cost of debt before tax