1. The Holmes Company's currently outstanding bonds have a 9% coupon and a 12% yield to maturity. Holmes believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 35%, what is Holmes's after-tax cost of debt? Round your answer to two decimal places.
2. You’ve just joined the investment banking firm of Dewey, Cheatum, and Howe. They’ve offered you two different salary arrangements. You can have $8,500 per month for the next two years, or you can have $7,200 per month for the next two years, along with a $38,500 signing bonus today. Assume the interest rate is 8 percent compounded monthly.