Question: Ernsts 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

Ernsts 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 semi-annually. The bonds are currently quoted at 96 percent of face value. What is Ernsts pre-tax cost of debt?

a. 5.33 percent

b. 5.53 percent

c. 4.47 percent

d. 5.94 percent

e. 4.97 percent

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