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Finance / July 19, 2018 / Andi Barnett

The cost of debt is the monetary price of servicing the interest and principal payments of obligations used to raise capital for a company. In other words, it’s the price companies pay to acquire and keep debt.

In the real world, simple interest is rarely used. When you deposit money into an interest-bearing account, or take out a line of credit, the interest that accumulates is added to the principal, and the next interest calculation is done on both the principal and the interest.

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