Stancorp has a $125 million debt issue outstanding, with a 5.8% coupon rate. The debt has semi-annual coupons. with the next coupon is due in six months. The debt matures in ?ve years. It is currently priced at 94% of par value.
a. What is Stancorp's pre-tax cost of debt? Note: Compute the effective annual return.
b. If Stancorp faces a 30% lax rate. what is its a?er-tax cost of debt?