T/F: If you are using the yield to maturity from outstanding bonds to infer the cost of debt it is important that the bo...

Question

Question

T/F: If you are using the yield to maturity from outstanding bonds to infer the cost of debt it is important that the bonds be zero coupon bonds.

Answer 1

Answer #1

Ans TRUE

If you are using the yield to maturity from outstanding bonds to infer the cost of debt it is important that the bonds be zero coupon bonds.

Answer 2

Similar Homework Help Questions

After-Tax Cost of Debt LL Incorporated's currently outstanding 8% coupon bonds have a yield to maturity of 13%. LL belie...

After-Tax Cost of Debt LL Incorporated's currently outstanding 8% coupon bonds have a yield to maturity of 13%. LL believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 35%, what is LL's after-tax cost of debt? Round your answer to two decimal places.?
Why is It a standard practice to estimate the cost of debt using yield to maturity...

Why is It a standard practice to estimate the cost of debt using yield to maturity on a portfolio of bonds with similar credit rating and maturity as the firm’s outstanding debt?
The Holmes Company's currently outstanding bonds have a 10% coupon and a 12% yield to maturity....

The Holmes Company's currently outstanding bonds have a 10% coupon and a 12% yield to maturity. Holmes believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 25%, what is Holmes' after-tax cost of debt? Round your answer to two decimal places.

The Holmes Company's currently outstanding bonds have a 7% coupon and a 10% yield to maturity....

The Holmes Company's currently outstanding bonds have a 7% coupon and a 10% yield to maturity. Holmes believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 25%, what is Holmes' after-tax cost of debt? Round your answer to two decimal places.
The Holmes Company's currently outstanding bonds have a 9% coupon and an 11% yield to maturity....

The Holmes Company's currently outstanding bonds have a 9% coupon and an 11% yield to maturity. Holmes believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 25%, what is Holmes' after-tax cost of debt? Round your answer to two decimal places. %%
The Holmes Company's currently outstanding bonds have a 8% coupon and a 14% yield to maturity....

The Holmes Company's currently outstanding bonds have a 8% coupon and a 14% yield to maturity. Holmes believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 35%, what is Holmes's after-tax cost of debt? Round your answer to two decimal places.

The Holmes Company's currently outstanding bonds have an 8% coupon and a 14% yield to maturity....

The Holmes Company's currently outstanding bonds have an 8% coupon and a 14% yield to maturity. Holmes believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 25%, what is Holmes' after-tax cost of debt? Round your answer to tw decimal places
The Holmes Company's currently outstanding bonds have a 10% coupon and a 14% yield to maturity....

The Holmes Company's currently outstanding bonds have a 10% coupon and a 14% yield to maturity. Holmes believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 25%, what is Holmes' after-tax cost of debt? Round your answer to two decimal places.
The Holmes Company's currently outstanding bonds have a 7% coupon and a 14% yield to maturity....

The Holmes Company's currently outstanding bonds have a 7% coupon and a 14% yield to maturity. Holmes believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 25%, what is Holmes' after-tax cost of debt? Round your answer to two decimal places. % ?

LL Inc.’s currently outstanding 15% coupon bonds have a yield to maturity of 8.6%. LL believes...

LL Inc.’s currently outstanding 15% coupon bonds have a yield to maturity of 8.6%. LL believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 30%, what is LL’s after tax cost of debt? Please - no rounding