Question: Ernst's Electrical has a bond issue outstanding with ten years to maturity. These bonds have a $1,000 face value, a 5 percent coupon, and pay

Ernst's Electrical has a bond issue outstanding with ten years to maturity. These bonds have a $1,000 face value, a 5 percent coupon, and pay interest annually. The bonds are currently quoted at 99 percent of face value. What is Ernst's pre-tax cost of debt?

Select one:

a. 5.53 percent

b. 5.03 percent

c. 5.13 percent

d. 6.47 percent

e. 5.40 percent

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