The Cost of Capital Should Reflect the Average Cost of the Various

question 29

True/False

The cost of capital should reflect the average cost of the various sources of long-term funds a firm uses to support its assets.

---

Definitions:

Yield to Maturity

Yield to Maturity (YTM) is the total return anticipated on a bond if the bond is held until the date it matures, accounting for interest payments and principal recovery.

Par Value

The face value of a bond or stock as stated by the issuing company, not necessarily its market value.

Annual Coupon

The annual interest payment made to bondholders, typically fixed and expressed as a percentage of the bond's face value.

Income Effect

The change in an individual's or economy's income and how that change affects the quantity demanded of a good or service.