A company borrows money using corporate bonds that yield 6.5 percent. This interest rate can also...

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A company borrows money using corporate bonds that yield 6.5 percent. This interest rate can also...

A company borrows money using corporate bonds that yield 6.5 percent. This interest rate can also be called:

Multiple Choice

capital gains yield.
compound rate.
current yield.
cost of debt.
cost of capital.

business finance

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Answer 1

Answer #1

Capital Gain Yield = Total Yield - Current Yield

Compound rate means int is calculated on Principle as well as Int

Current Yiled = Total Yield - Capital gain yield

COst of Debt is the Rate at which PV of Cash Inflows and PV of Cash Outflows are same.

Cost of Capital is the Rate required by Equity Holders.

Thus Yield is also called as COst of Debt.

OPtion D is correct.

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Answer 2

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