A firm issues $160 million in straight bonds at par and a coupon rate of 8.5%.The firm pays fees of 2% 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 firm pays 2% in fees on the $160 million face value, which is $3.2 million. Therefore, the net amount of funds is $160 million - $3.2 million = $156.8 million, which is closest to $157 million.

A Firm Issues $160 Million in Straight Bonds at Par