Too Young, Inc., has a bond outstanding with a coupon rate of 6.9 percent and semiannual payments. The bond currently sells for $950 and matures in 24 years. The par value is $1,000. What is the company's pretax cost of debt?
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Too Young, Inc., has a bond outstanding with a coupon rate of 6.9 percent and semiannual payments. The bond currently sells for $950 and matures in 24 years. The par value is $1,000. What is the company's pretax cost of debt?
Par value = $1,000
Coupon rate = 6.9%
Semi annual coupon amount = 1000*0.0690/2 = $34.50
Years to maturity = 24 years
Number of semi annual payments = 24*2 = 48
Price of bond = $950
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