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Q28 PLEASE ANSWER CORRECTLY AND PROMPTLY!! SHOW ALL WORK!!! Suppose you are trying to calculate a bond's effective YTM in order to use it in
Q28 PLEASE ANSWER CORRECTLY AND PROMPTLY!! SHOW ALL WORK!!!
Suppose you are trying to calculate a bond's effective YTM in order to use it in a WACC calculation. The bond has a coupon rate of 11% and pays coupons semi-annually. You just finished using trial and error to get the per period rate, and it is 5% (in other words, 5% gives the correct price when used in the bond pricing formula for this particular bond that pays coupons twice a year). What is the correct pre-tax rate to use as the cost of debt in your WACC calculation? A. 5% B. 5.5% C. 11.5% D. 11% E. 10.25% F. 10.5% G. 10%Step by Step Solution
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