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If a Firm's Bonds Are Currently Yielding 8% in the Marketplace

Question 3
Multiple Choice

If a firm's bonds are currently yielding 8% in the marketplace, why would the firm's cost of debt be lower? A) Interest rates have changed. B) Additional debt can be issued more cheaply than the original debt. C) There should be no difference; cost of debt is the same as the bond's market yield. D) Interest is tax-deductible.

D

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