What is the significance of a cost of capital of 6% for bonds?

The cost of capital being 6% for bonds is significant primarily because it indicates the cost associated with borrowing capital. This figure represents the return that investors require for lending money to the issuer of the bonds. When the company issues bonds, it is effectively taking on debt, and the cost of capital reflects the interest expense that the company must pay to its bondholders. This cost is crucial for the company to understand, as it helps in assessing the feasibility of financing projects through debt versus equity.

In financial decision-making, a clear understanding of the cost of capital allows companies to evaluate potential investments and the impact of debt on their financial health. If the expected return on an investment is greater than the cost of capital (6% in this case), then the project is likely to be considered acceptable or profitable.

The other options relate to concepts that, while important in their contexts, do not specifically address the direct implications of a cost of capital of 6% regarding bonds. For instance, equity returns, market volatility, and operational efficiency are influenced by wider economic or corporate factors, rather than solely indicating the cost associated with borrowing capital through bonds.