Corporate Finance

Posts: 9
Joined: Sat Jun 07, 2014 7:14 am

Corporate Finance

Postby neha.kapoor318 » Mon Aug 11, 2014 4:54 am

Dot com has determined that it could issue $1000face value bonds with an 8 percent coupon paid semi annually and a five year maturity at $900 per bond. If Dot com's marginal tax rate is 38%, it's after tax cost of debt is closest to : A) 6.2 % B) 6.4% C)6.6%? Can u please tell me how to calulate this and also i am don't know how to do calculation using Financial calculator i am using BA II plus Texas Instrument?

Finance Junkie
Posts: 704
Joined: Wed Apr 09, 2014 6:28 am

Corporate Finance

Postby edupristine » Mon Aug 11, 2014 10:33 am

Put the values in Calculator:-
PV= -900, N = 10, PMT= 40, FV= 1000, I/Y=?
I/Y= 5.3149%
Multiply by 2(Compounded Semi - annually)= 5.3149%*2 = 10.6298%
Now we can calculate after tax cost of debt:-
10.6298%(1-38%) = 6.5905%
So, we can conclude the correct answer is C.

Return to “CFA Level I”


Global Association of Risk Professionals, Inc. (GARP®) does not endorse, promote, review or warrant the accuracy of the products or services offered by EduPristine for FRM® related information, nor does it endorse any pass rates claimed by the provider. Further, GARP® is not responsible for any fees or costs paid by the user to EduPristine nor is GARP® responsible for any fees or costs of any person or entity providing any services to EduPristine Study Program. FRM®, GARP® and Global Association of Risk Professionals®, are trademarks owned by the Global Association of Risk Professionals, Inc

CFA Institute does not endorse, promote, or warrant the accuracy or quality of the products or services offered by EduPristine. CFA Institute, CFA®, Claritas® and Chartered Financial Analyst® are trademarks owned by CFA Institute.

Utmost care has been taken to ensure that there is no copyright violation or infringement in any of our content. Still, in case you feel that there is any copyright violation of any kind please send a mail to and we will rectify it.