Bailey's Dog Pens, Inc., with the help of its investment bank recently issued $9,000,000 of new debt. The offer price on the debt was $1,000 per bond and the underwriter's spread was 5.5 percent of the gross proceeds. Calculate the amount of capital funding Bailey's Dog Pens raised through this bond issue.

Question

Quizplus · Accepted Answer

The amount of capital funding raised is calculated by subtracting the underwriter's spread from the gross proceeds. The underwriter's spread is 5.5% of $9,000,000, which is $495,000. Therefore, the amount raised is $9,000,000 - $495,000 = $8,505,000.