A firms cost of debt is 6 but its bond issues in the market, Financial Management

A firms cost of debt is 6 but its bond issues in the market

1. A firm’s cost of debt is 6%, but its bond issues in the market yield 8%. Please explain how this difference can arise.

2. You buy an ordinary annuity today for $145467, which promises to pay you $13489 per year. If the interest rate is 5.14 percent, for how many years will you receive payments?

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Financial Management: A firms cost of debt is 6 but its bond issues in the market

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Financial Management: A firms cost of debt is 6 but its bond issues in the market

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