Question: All interest rates are annually compounded unless stated otherwise. All bonds have a face value of $1000 unless stated otherwise. A firm has three types

All interest rates are annually compounded unless stated otherwise. All bonds have a face value of $1000 unless stated otherwise. A firm has three types of bonds outstanding. Its most senior bonds have YTM=5%. The bonds with intermediate seniority have YTM=6%. The most junior bonds have YTM=9%. The market value of each type of bonds is $1M. Find the best estimate for the firms cost of debt that you would use in WACC calculation.

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