Problem:
S. Claus & Company is planning a zero coupon bond issue. The bond has a par value of $1,000, matures in 2 years, and will be sold at a price of $826.45.
Required:
Question: What is the annual cost of debt (YTM) to the company on this issue?
• 4.0%
• 6.0%
• 8.0%
• 10.0%
• 12.0%
Note: Please provide full description.