The cost of debt is defined as the: annual interest divided by the current price
ID: 2602314 • Letter: T
Question
The cost of debt is defined as the:
annual interest divided by the current price
pre-tax change in the face value of a bond over time
aftertax change in the face value of a bond over time
capital gain less the interest income
return that lenders require on any new borrowing by the firm
a.annual interest divided by the current price
b.pre-tax change in the face value of a bond over time
c.aftertax change in the face value of a bond over time
d.capital gain less the interest income
e.return that lenders require on any new borrowing by the firm
Explanation / Answer
Answer:return that lenders require on any new borrowing by the firm
Cost is the expense incurred for using funds borrowed.When investors lend their funds they expect certain returns from the borrower.This becomes the cost of debt.
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