\\ ' _ _} \\ \\ '\\\\_'__ _/ _/// ________'\\_'____l __ 4C. Explanation of higher yield on coupon bonds versus zero coupon bonds An insurance company might reguire slightly higher annual yield on coupon bonds compared to bonds with zero coupons because that money is coming back to the investor and that money can then be reinvested. With zero coupon bonds, the money will be returned in a lump sum and the bond holder will then be allowed to make another investment. 5A. 4.33% Effective after-tax cost of debt (expressed as a percentage) =[1 + (.06625f1)]1 1 * (1-.35) 5B. Annual tax savings Present value of annual tax savings 6A. 'Why do the IRBs have a lower effective yield? IRB's have a lower effective eld because interest and principal paid on debt was repaid by Weyerhauser. There is also a tax break associated with the IRB's which allow for a more money for Weyerhauser. 6B. Present value of tax savings