The closest answer is 5.66%, but this is significantly different than the correct answer, which is 6.19%.
<h3>Noncallable bonds </h3>
A non-callable bond is a bond that is only paid out at maturity. The issuer of a non-callable bond can't call the bond before its date of maturity.
Support is below.
The pre-tax cost of debt is computed as follows:
Pre-tax Cost = Annual Coupon / Market Value
Pre-tax Cost = ($1,000 * .10) / $1,050.76 = .0952 or 9.52%
The after-tax cost of debt is computed as follows:
After-tax Cost = Pre-tax Cost * (1-Tax Rate)
After-tax Cost = .0952 * (1-.35) = .0619 or 6.19%
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