The cost of debt: Bellamee, Inc., has semiannual 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?

Question

Quizplus · Accepted Answer

The YTM is calculated using the bond price, coupon rate, and time to maturity. The bond's price is $920.87, the coupon rate is 7% (semiannual payments of 3.5%), and it has 10 periods (5 years * 2). Solving for YTM gives approximately 9% annually.

The Cost of Debt: Bellamee, Inc