Question

B&B of Texas reported three debt obligations: $2,000,000, 4.5% notes payable $1,900,000, 7% bonds issued at...

  1. B&B of Texas reported three debt obligations:

  • $2,000,000, 4.5% notes payable
  • $1,900,000, 7% bonds issued at par
  • $4,000,000, 8% mortgage notes

If the market rate of interest averaged 6% during the year, what is B&B’s weighted-average cost of debt?

  1.   8.67%
  2.   6.50%
  3.   7.00%
  4.   6.87%
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