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Textile Mills borrows money at a rate of 13.5%. This interest rate is referred to as the a....

Question:

Textile Mills borrows money at a rate of 13.5%.

This interest rate is referred to as the

a. compound rate.

b. current yield.

c. cost of debt.

d. capital gains yield.

e. cost of capital.

Cost of Debt:

The cost of debt is a financial term used to define the price that a company or an individual needs to pay back for borrowing a principal amount of money. The amount of money additional to the repayment of the principal is known as interest.

Answer and Explanation:

The correct answer is the option c. cost of debt.

The cost of debt is rate of interest that a company pays on its debt obligations and liabilities such as loans or bonds. Therefore, the correct answer is letter c.


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