The average rate of return that investors require to provide funds to the firm in the form of debt is the ________.

Question

Quizplus · Accepted Answer

The average yield to maturity (YTM) on the firm's bonds represents the average rate of return that investors require to provide funds to the firm in the form of debt. YTM takes into account both the coupon rate and the price of the bond, and thus reflects the market's expectation of the bond's return. Option A only represents the stated rate of interest on the bond, while option C represents the face value of the bond, neither of which is directly related to the required rate of return. Option D refers to the firm's cost of capital, which includes both debt and equity, while option E relates to the firm's internal performance, which is not necessarily related to the cost of debt.

The Average Rate of Return That Investors Require to Provide