Question
Sterling Corp. bonds pay 10% annual interest and are selling at 97.The market rate of interest (A). is greater than 10% (B) equals 10% is
Sterling Corp. bonds pay 10% annual interest and are selling at 97.The market rate of interest
(A). is greater than 10%
(B) equals 10%
is less than 10%
(D) cannot be determined
I think the market rate or market rate of interest is actually the annual, before-tax yield to maturity (Y), annual, before-tax (or pre-tax) cost of debt (Y), and the annual, before-tax (or pre-tax) cost of debt capital (Y).
What is the formula found in most finance books or websites, which can be used to solve the above problem? And, can you show me step by step how this problem can be solved, please? Thank you very much!
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