A firm issues $200 million in straight bonds at an original issue discount of 0.75% and a coupon rate of 7%. The firm pays fees of 2.5% on the face value of the bonds. The net amount of funds that the debt issue will provide for the firm is closest to which of the following?

Question

Quizplus · Accepted Answer

The original issue discount is 0.75% of $200 million, which is $1.5 million. The fees are 2.5% of $200 million, which is $5 million. The net amount is $200 million - $1.5 million - $5 million = $193.5 million.

A Firm Issues $200 Million in Straight Bonds at an Original