Use the following statements to answer this question:
I.The cost of debt of the firm is always constant.
II.The estimation of the cost of debt using the yield to maturity requires the price of the bonds now.
A)I and II are correct.
B)I and II are incorrect.
C)I is correct and II is incorrect.
D)I is incorrect and II is correct.

Question

Quizplus · Accepted Answer

The cost of debt for a firm can vary due to changes in interest rates and the firm's creditworthiness, making statement I incorrect. Statement II is correct because estimating the cost of debt using the yield to maturity indeed requires knowing the current price of the bonds.

Use the Following Statements to Answer This Question