A firm issues $250 million in straight bonds at an original discount of 0.75% and a coupon rate of 9%. The firm pays fees of 3% 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 net amount of funds = Face value of the bonds - Original discount - Fees. Original discount = 0.75% of $250 million = $1.875 million. Fees = 3% of $250 million = $7.5 million. So, the net amount = $250 million - $1.875 million - $7.5 million = $240.625 million, which is closest to $241 million.

A Firm Issues $250 Million in Straight Bonds at an Original