Suppose the risk free rate is 2% and expected market risk premium is 6%. The effective cost of debt for abc corp is closest to_____. a. 3.86% b. 2.5% c. 5.2% d. 3.38

Consider the following information regarding corporate bonds: Rating AAA A BBB BB B CCC Average Beta 0.05 0.05 0.05 0.10 0.17 0.26 0.31 Market Value of Equity Company ($m) Market Value of Debt ($m) Equity Beta Debt Rating Abs Coca $4,500 $3,500 1.2 CCC Yield to Maturity 5.2 Tax rate 35%