Alberta Energy issues $150 million in straight bonds at par with a coupon rate of 6%.The firm also pays underwriting fees of 2% on the face value of the bonds.What are the net proceeds to Alberta Energy from the bond issue?

Question

Quizplus · Accepted Answer

The net proceeds are calculated by subtracting the underwriting fees from the total bond issue. The underwriting fees are 2% of $150 million, which is $3 million. Therefore, the net proceeds are $150 million - $3 million = $147 million.

Alberta Energy Issues $150 Million in Straight Bonds at Par