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The Relative Cost of Issuing Debt (Interest Payments) Is Often

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Essay

The relative cost of issuing debt (interest payments) is often lower than the cost of issuing equity.


Definitions:

Nominal Price

Absolute price of a good, unadjusted for inflation.

CPI (Consumer Price Index)

An indicator that assesses the weighted mean of the prices for a selection of consumer products and services, including food, transportation, and healthcare, aimed at calculating the living expenses.

Real Price

The price of a good or service adjusted for inflation, reflecting its purchasing power over time.

Real Return

Simple (or nominal) return on an asset, less the rate of inflation.

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