The Pre-Tax Cost of Debt

Multiple Choice

The pre-tax cost of debt:

A) is based on the current yield to maturity of the firm's outstanding bonds.
B) is equal to the coupon rate on the latest bonds issued by a firm.
C) is equivalent to the average current yield on all of a firm's outstanding bonds.
D) is based on the original yield to maturity on the latest bonds issued by a firm.
E) has to be estimated as it cannot be directly observed in the market.