Worldwide Chemical Corp. plans to sell 20,000 bonds each with a face value of $1,000. If all of the bonds eventually sell for $950 each and the firm's investment banker receives a commission of 2.00% for every bond sold, what are the net proceeds to the firm from the sale of the bond issue?

Question

Quizplus · Accepted Answer

The firm sells each bond for $950, so the total revenue is 20,000 bonds * $950 = $19,000,000. The investment banker receives a 2% commission on each bond, which is $950 * 0.02 = $19 per bond. Therefore, the total commission is 20,000 bonds * $19 = $380,000. The net proceeds to the firm are $19,000,000 - $380,000 = $18,620,000.