Too Young, Inc., has a bond outstanding with a coupon rate of 6.8 percent and semiannual payments. The bond currently sells for $949 andmatures in 25 years. The par value is $1,000. What is the company's pretax cost of debt?Multiple Choice760%785%O 739%3.59%Multiple ChoiceOO7.60%7.85%3.59%7.39%7.24% b.The cost of preferred stock:Multiple ChoiceOOOOis highly dependent on the dividend growth rate.is equal to the dividend yield.decreases when tax rates increase.is equal to the yield to maturity.is independent of the stock's price.

Semiannual coupon payment = (Coupon rate/2)*Par value of bond = 0.068/2×$1000 = $34 Number of…

Too Young, Inc., has a bond outstanding with a coupon rate of 6.8 percent and semiannual payments. The bond currently sells for $949 and matures in 25 years. The par value is $1000. What is the company's pretax cost of debt? O 760% O 1.596 Multiple Choice 739% O 7.60% O 7.85% 3.59% 7.39% 7.24%

Too Young, Inc., has a bond outstanding with a coupon rate of 6.8 percent and semiannual payments. The bond currently sells for $949 and matures in 25 years. The par value is $1000. What is the company's pretax cost of debt? O 760% O 1.596 Multiple Choice 739% O 7.60% O 7.85% 3.59% 7.39% 7.24%

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

Too Young, Inc., has a bond outstanding with a coupon rate of 6.8 percent and semiannual payments. The bond currently sells for $949 and
matures in 25 years. The par value is $1,000. What is the company's pretax cost of debt?
Multiple Choice
760%
785%
O 739%
3.59%
Multiple Choice
O
O
7.60%
7.85%
3.59%
7.39%
7.24%

b.
The cost of preferred stock:
Multiple Choice
O
O
O
O
is highly dependent on the dividend growth rate.
is equal to the dividend yield.
decreases when tax rates increase.
is equal to the yield to maturity.
is independent of the stock's price.

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