Buchanan Corp. is refunding $10 million worth of 10% debt. The new bonds will be issued for 8%. The corporation's tax rate is 35%. The call premium is 9%. What is the net cost of the call premium?
A. $390,000
B. $1,080,000
C. $585,000
D. $702,000
2. A bond with a coupon rate of 6.5%, maturing in 10 years at a value of $1,000 and current market price of $695 will have a current yield of
A. 11.3%
B. 10.2%
C. 9.4%
D. 8.5%