Jj Thomson was the person who first postulated the existence of the electron
<span>In the financial industry, "securitization" refers to bundling debt, such as loans, bonds and mortgages into securities. In finance, a security is a tradable asset. They are debt securities such as bonds and then there are equity securities such as stocks. Bundling debt keeps everything organized and streamlined for people to know what they need to pay down. </span>
Answer:
5.4%
Explanation:
Several years ago the Haverford Company sold a $1,000 par value bond that now has 25 years to maturity and an 8.00% annual coupon that is paid quarterly. The bond currently sells for $900.90, and the company’s tax rate is 40%. What is the component cost of debt for use in the WACC calculation
Face value of bond = coupon amount / interest rate
1000 = 80 / 8%
Therefore 900.9 = 80 / revised interest rate
multiply both sides by the 'revised interest rate
revised interest rate x 900.9 = 80
Hence, revised interest rate = 80 / 900.9 = 9%
Secondly if the company’s tax rate is 40%, the component cost of debt for use in the WACC calculation = kd (1 - t)
where:
kd = Cost of debt
t = tax rate
Therefore cost of debt for use in the WACC calculation = 9% (1-0.4) = 5.4%
