3M Bonds Are Currently Trading at $1,104

question 61

Multiple Choice

3M bonds are currently trading at $1,104.07.The bonds have a face value of $1,000,an annual coupon rate of 6.75%,and mature in 4 years.What is the yield-to-maturity?

• A) 3.89%
• B) 6.25%
• C) 8.04%
• D) 7.25%
• E) 6.85%

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Definitions:

Debt-Equity Ratio

A gauge illustrating the mix between shareholder equity and debt in a company’s asset-financing strategy.

Weighted Average Cost of Capital

A calculation of a firm's cost of capital in which each category of capital is proportionately weighted, reflecting the expected cost of all available funding sources.

Weight of Preferred Stock

The proportion of preferred stock in a company’s capital structure, used in calculating the cost of capital or investment risk.

Weighted Average Cost of Capital

A calculation that reflects the cost of a company's capital, including equity and debt, weighted by their proportion in the total capital structure.