The Bet-r-Bilt Company has a six-year bond outstanding with a 5 percen

The Bet-r-Bilt Company has a six-year bond outstanding with a 5 percent coupon. Interest payments are paid semi-annually. The face amount of the bond is $1,000. This bond is currently selling for 98 percent of its face value.

What is the company’s pre-tax cost of debt?
A) 4.72 percent
B) 5.31 percent
C) 5.35 percent
D) 5.39 percent
E) 5.42 percent

ANSWER

D