Implied Interest Rate

Implied Interest Rate

Last Updated by WikiWealth

The implied cost of debt or interest rate is the specific interest rate paid on debt held by a company of individual.

Equation = interest expense / total interest bearing debt.

WikiWealth compares the implied cost of debt to the assumed cost of debt capital for a company. If the implied rate is much bigger than the assumed cost of debt, then the company is much riskier than anticipated when compared to the industry.