In Order for a Company to Estimate Its Cost of Debt

question 32

Multiple Choice

In order for a company to estimate its cost of debt capital by observing the price of its debt instruments,

• A) the company must depend on markets being reasonably efficient.
• B) the debt must be privately held.
• C) the beta of the debt must be greater than the beta of the company's equity.
• D) None of the above.

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Definitions:

Systematic Sampling

Sampling by selecting every nth unit from a population.

Snowball Sampling

A non-probability sampling technique where existing study subjects recruit future subjects from among their acquaintances.

Nonprobability Sampling

A sampling technique where the samples are gathered in a process that does not give all the individuals in the population equal chances of being selected.

Lotteries

Games of chance where winners are selected by drawing lots, often used as a means of raising funds.