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A firm has two public bond issues outstanding and no other long-term debt. The first are trading at face value, have coupon rate 6%, face
A firm has two public bond issues outstanding and no other long-term debt. The first are trading at face value, have coupon rate 6%, face value of $1,000, and mature in 12 years. Coupon payments are made semiannually. There are 2,000 of these bonds outstanding. The second are zero-coupon bonds with face value of $1,000, YTM of 3%, and mature in 4 years. There are 5,000 of these bonds outstanding. What is the firm's cost of debt?
3% |
6% |
3.86% |
3.93% |
Cannot be determined. |
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