The corporate cost of debt can be approximated by ______.
A) regressing stock returns on market returns
B) the average historical rate of 8.2 percent on corporate debt
C) the coupon rate on existing corporate debt
D) the risk-free rate of interest on government bonds
E) the yield to maturity on existing corporate debt

Question

Quizplus · Accepted Answer

The yield to maturity on existing corporate debt represents the investors' expected return on that debt, which includes compensation for the credit risk associated with the company. This yield can be used to approximate the cost of debt for the company.

The Corporate Cost of Debt Can Be Approximated by ______