Relationship between the cost of debt and levered equity

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Reference no: EM131939408

1. A Government of Canada bond has a 6 percent coupon which pays semi-annually and matures in 11 years. If interest rates have declined to 5.4 percent for similar bonds, what should be the price for this bond? (Assume $1000 par value)

2. Explain the probable forms of the cost-of-debt function and the reasons for a specific relationship between the cost of debt and levered equity.

Reference no: EM131939408

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