**Answer:**

Find the answers below

**Explanation:**

The total book value of the debt is the sum of the two bonds book values

total book value=$60 million+$35 million=$95 million

Total market value of bonds is the sum of the two bonds market values

total market values=$60 million*91%+$35 million*51%

=$54.6 million+$17.85 million=$72.45 million

After tax cost of debt =pretax cost of debt*(1-t) where t is the tax rate of 38% or 0.38

For the first bond:

=rate(nper,pmt,-pv,fv)

nper is the number of interest the bonds would pay from now on,i.e (15-4)*2=22

pmt is the semiannual interest payment,which is:$60 million*10%/2=$3 million

pv is the market value of $54.6 million

fv is the book value of $60 million

=rate(22,3,-54.6,60)=5.73%

5.73% is the semiannual rate ,where 11.46% is the annual rate

after tax cost of debt=11.46%*(1-0.38)=7.11%

the second bond:

nper is 11 (11 years left to maturity)

pmt is nil since it is a zero coupon bond

pv is $17.85 million

fv is $35 million

=rate(11,0,-17.85,35)=6.31%

after tax cost of debt=6.31%
*(1-0.38)=3.91%