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Pride of Lions has bonds outstanding that carry an annual coupon of 5.75 percent. The bonds mature in 9 years and are currently priced at 98 percent of face value. What is the firm's pretax cost of debt? Multiple Choice o A. 6.04 percent B. 9.850 percent C. 8.60 percent D. 1.28 percentE. 12.02 percent

Respuesta :

Answer:

A. 6.04 percent

Explanation:

In this question, we use the Rate formula which is shown in the spreadsheet.  

The NPER represents the time period.  

Given that,  

Present value = $1,000 × 98% = $980

Assuming figure - Future value or Face value = $1,000  

PMT = 1,000 × 5.75% = $57.50

NPER = 9 years

The formula is shown below:  

= Rate(NPER;PMT;-PV;FV;type)  

The present value come in negative  

So, after solving this,  The pretax cost of debt is 6.04%

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