Question $5$

Oberon inc. has a $$20$ million $($ $$1,000$ face value$)10-$year bond issue selling for $99$ percent of par that pays an annual coupon of $7\mathrm{.}25$ percent. What would be Oberon's before$-$tax component cost of debt?

$8\mathrm{.}15$ percent

$6\mathrm{.}12$ percent

$7\mathrm{.}40$ percent

$7\mathrm{.}02$ percent