If a firm has publicly traded debt then the yield to maturity is approximately the same as:

Question

Quizplus · Accepted Answer

The yield to maturity on publicly traded debt represents the investor's expected rate of return based on the price of the bond and its future cash flows. This is closely related to the before-tax cost of debt, which is the rate at which a company can borrow money before accounting for any tax benefits. The yield to maturity will typically be higher than the before-tax cost of debt due to the risk premium required by investors. Therefore, option B is the best choice. Option A is incorrect since it refers to the after-tax cost of debt, which takes into account any tax savings from interest payments, whereas the yield to maturity does not. Option C is incorrect because the 10-year Treasury bond rate is a benchmark rate for the risk-free rate, not the cost of debt for a specific company. Option D is incorrect because the WACC includes the cost of all capital, not just debt, and therefore would not necessarily be equal to the yield to maturity on publicly traded debt.

If a Firm Has Publicly Traded Debt Then the Yield