Sunday, August 14, 2011

What is the yield to maturity on a companys bonds if its aftertax cost of debt is 10% and its tax rate is 35%?

The yield to maturity has nothing to do with the after tax cost of debt or its tax rate. Yield to maturity is the estimated return if a bond is held to maturity. It is affected by the interest rate on the bond, the current market price of the bond, and the time to maturity.

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