The Corporate Cost of Debt Can Be Approximated by ______

question 37

Multiple Choice

The corporate cost of debt can be approximated by ______.

• A) regressing stock returns on market returns
• B) the average historical rate of 8.2 percent on corporate debt
• C) the coupon rate on existing corporate debt
• D) the risk-free rate of interest on government bonds
• E) the yield to maturity on existing corporate debt

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Definitions:

Common Shares

Equity securities that represent ownership in a corporation, providing voting rights and entitling the holder to a share of the company’s success through dividends and/or capital appreciation.

Unamortized Premium

The portion of a bond premium that has not yet been amortized or gradually written off against earnings over the bond's life.

Wholly Owned Subsidiary

A company whose entire share capital is owned by another company, making it fully controlled by the parent company.

Statement of Comprehensive Income

A financial statement that includes all changes in equity during a period, except those resulting from investments by owners and distributions to owners, encompassing both net income and other comprehensive income.