Junk bonds are very poorly rated bonds with a high probability of default. The yield to maturity on a junk bond is 0.20. The probability of default on the bond is 0.141. Investors expect to lose 60% of their investment in the event of default. What is the appropriate cost of debt for the firm that issued these junk bonds?

Junk bonds are very poorly rated bonds with a high probability of default. The yield to maturity on a junk bond is 0.20. The probability of default on the bond is XXXXXXXXXXInvestors expect to lose...

Junk bonds are very poorly rated bonds with a high probability of default. The yield to maturity on a junk bond is 0.20. The probability of default on the bond is 0.141. Investors expect to lose 60% of their investment in the event of default. What is the appropriate cost of debt for the firm that issued these junk bonds?

Jun 04, 2022