The approximate before-tax cost of debt for a 10-year, 8 percent, $1,000 par value bond selling at $1,150 is

Name: The approximate before-tax cost of debt for a 10-year, 8 percent, $1,000 par value bond selling at $1,150 is
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The before-tax cost of debt is the yield to maturity (YTM) on the bond. Since the bond is selling at a premium ($1,150), the YTM will be lower than the coupon rate of 8%. Calculating the YTM using a financial calculator or YTM formula gives approximately 6%.

The Approximate Before-Tax Cost of Debt for a 10-Year, 8