Risk-free securities-what is pretax cost of debt

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Reference no: EM132061896

1. Assume that interest rate parity holds. In the spot market 1 Japanese yen = $0.014, while in the 180-day forward market 1 Japanese yen = $0.0142. 180-day risk-free securities yield 1.7% in Japan. What is the yield on 180-day risk-free securities in the United States? Round your answer to 2 decimal places. Do not round intermediate calculations.

2. Waller, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 8 years to maturity twith a current price of $1042. The issue makes semiannual payments and has coupon rate of 8 percent. If the tax rate is 0.28, what is the pretax cost of debt? Enter the answer with 4 decimals (e.g. 0.0123).

Reference no: EM132061896

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