FIN 6100 EXAM 2 QUESTIONS WITH
100% CORRECT ANSWERS | LATEST
VERSION 2025/2026.
What is the cost of capital? - ANS the overall interest rate that companies pay to finance
operations and the purchase of assets.
What happens if a company is earning more than their WACC rate?
Less than? - ANS more: they are increasing the value of its equity
less: losing value for shareholders
WACC formula?
What do the different parts stand for? - ANS WACC = WdKd(1-T) + WeKe
Wd: weight of debt
Kd: cost of debt (interest rate)
T: Tax shield (cost of debt after interest)
We: weight of equity
Ke: return on equity
1 | Page @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
, What does the cost of debt mean? - ANS the interest rate we would expect to pay on
borrowed funds
(Kd)
What is the best way to measure cost of debt? - ANS Bonds
Terms to know
Maturity/term
Remaining term
Face Value
Coupon Payment - ANS maturity/term: total life of the bond from origination to termination
remaining term: how much time until maturity
face value: amount of money returned when the bond matures
Coupon Payment: amount paid periodically to buyer.
coupon payment formula - ANS payment = face value (FV) x coupon rate
Where are the terms of a bond set?
what does it include? (4) - ANS in the Indenture contract
1. coupon rate and frequency
2. options attached
2 | Page @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
100% CORRECT ANSWERS | LATEST
VERSION 2025/2026.
What is the cost of capital? - ANS the overall interest rate that companies pay to finance
operations and the purchase of assets.
What happens if a company is earning more than their WACC rate?
Less than? - ANS more: they are increasing the value of its equity
less: losing value for shareholders
WACC formula?
What do the different parts stand for? - ANS WACC = WdKd(1-T) + WeKe
Wd: weight of debt
Kd: cost of debt (interest rate)
T: Tax shield (cost of debt after interest)
We: weight of equity
Ke: return on equity
1 | Page @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
, What does the cost of debt mean? - ANS the interest rate we would expect to pay on
borrowed funds
(Kd)
What is the best way to measure cost of debt? - ANS Bonds
Terms to know
Maturity/term
Remaining term
Face Value
Coupon Payment - ANS maturity/term: total life of the bond from origination to termination
remaining term: how much time until maturity
face value: amount of money returned when the bond matures
Coupon Payment: amount paid periodically to buyer.
coupon payment formula - ANS payment = face value (FV) x coupon rate
Where are the terms of a bond set?
what does it include? (4) - ANS in the Indenture contract
1. coupon rate and frequency
2. options attached
2 | Page @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
