Suppose you are trying to calculate a bonds effective YTM in order to use it...
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Suppose you are trying to calculate a bonds 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 is5% (in other words, 5% gives the correct price when used in the bond pricing formula for this bond). What is the correct pre-tax rate to use as the cost of debt in your WACC calculation?
A.
10%
B.
10.25%
C.
10.5%
D.
11.5%
E.
5.5%
F.
11%
G.
5%
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