The cost of debt: Bellamee Ltd has bonds outstanding with five years to maturity and are priced at $920.87. If the bonds have a coupon rate of 7 percent, then what is the YTM for the bonds? (Assume $1000 Face Value of Bonds)

Question

Quizplus · Accepted Answer

The YTM is calculated using the bond price, coupon rate, face value, and time to maturity. The bond price is less than the face value, indicating a discount, which suggests a YTM higher than the coupon rate. Calculating using the formula or a financial calculator gives approximately 9.0%.

The Cost of Debt: Bellamee Ltd Has Bonds Outstanding with Five