Avicorp has a $10 million debt issue outstanding, with a 6% coupon rate. The debt has semi-annual coupons, the next coupon is due in 6 months, and the debt matures on 5 years. It is currently prices at 95% of its $1,000 face value. What is Avicorp’s cost of debt?
a) Avicorp’s cost of debt is 3.60% per 6 months or 7.34% per annum.
b) None of the other answers are true.
c) Avicorp’s cost of debt is 3% per 6 months or 6.09% per annum.
d) Avicorp’s cost of debt is 3.60% per quarter or 15.21% per annum.