A firm issues $300 million in straight bonds at an original issue discount of 0.50% and a coupon rate of 7%. The firm pays fees of 2.0% 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

D) Receipt after discount = $300 million × (1 - 0.005) = $298,500,000;
amount paid in fees = $300 million × 0.02 = $6 million;
net amount of funds = $292,500,000

A Firm Issues $300 Million in Straight Bonds at an Original