The 1-year bonds of Casino, Inc., have a 12 percent coupon rate and trade in the market
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Question:
The 1-year bonds of Casino, Inc., have a 12 percent coupon rate and trade in the market at a yield of 14 percent. There is a 5 percent chance that Casino will default and pay nothing. What cost of debt should be used in Casino's WACC?
Ans: 8.3 percent
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