The ________ of a firm's debt can be used as the firm's current cost of debt.

Question

Quizplus · Accepted Answer

The yield to maturity (YTM) of a bond represents the total return that an investor can expect to earn on a bond if the investor holds the bond until it matures and is paid in full. YTM takes into account not only the coupon rate but also the market price of the bond, any premium or discount, and the time to maturity. Therefore, YTM is a more accurate measure of a firm's current cost of debt than the coupon rate, which is the annual interest rate stated on the bond, or current yield, which is the annual interest payment divided by the current market price of the bond. Discount yield is the annual percentage rate of return earned by an investor who buys a discounted bond and holds it to maturity, while amount is not relevant to the cost of debt calculation.

The ________ of a Firm's Debt Can Be Used as the Firm's