20% off ACCA & CIMA Books

OpenTuition recommends the new interactive BPP books for March and June 2025 exams.
Get your discount code >>

YTM | Ch 2

This topic has 1 reply, 2 voices, and was last updated 5 years ago by P2-D2.

Viewing 2 posts - 1 through 2 (of 2 total)

Author
Posts
November 23, 2019 at 12:57 pm #553520
abbasisaeed
Participant
- Topics: 14
- Replies: 2
As mentioned in the text, Cost of debt uses post-tax interest expense in the calculation but YTM uses pre-tax interest income in the calculation. Can you please help me understand why is this the case (logical reasoning)?
November 24, 2019 at 10:25 pm #553654
P2-D2
Keymaster
- Topics: 4
- Replies: 7156
Hi,
The cost of debt is the cost of debt to the company, whereas the YTM is the return on the bond itself to the individual/holder. The company then saves the tax on this, giving the cost of debt.
Thanks
Author
Posts

Viewing 2 posts - 1 through 2 (of 2 total)

You must be logged in to reply to this topic.