Coupon rate on an issue of debt

Question

Answer the following question:

Question 1: The coupon rate on an issue of debt is 12%. The yield to maturity on this issue is 14%. The corporate tax rate is 31%. What would be the approximate after-tax cost of debt for a new issue of bonds?

• 4.34%
• 3.72%
• 9.66%
• 8.28%

2. The coupon rate on a debt issue is 12%. If the yield to maturity on the debt is 9.33%, what is the after-tax cost of debt in the weighted average cost of capital if the firm's tax rate is 34%?

• 3.17%
• 4.08%
• 6.16%
• 7.92%

Explain comprehensively and show all workings.