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Hello John,
Please could you clarify me on the difference between these terminologies for debt financing as I get really confused when I see them.
Thank you so much.
You must watch the free lectures on this (and the relevant F9 lectures, because this is revision from Paper F9) – I cannot type out all the lectures here.
Bond value and bond price are the same thing – the market value on the stock exchange.
Interest is the coupon rate – the interest on nominal value.
Interest yield is the interest as a % of the market value.
Cost of debt is the cost to the company – if the debt is redeemable then it is the IRR of the after-tax flows. If the debt is irredeemable then it the after tax interest as a % of the market value.
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