A firm issues $200 million in straight bonds at par and a coupon rate of 7%. The firm pays fees of 2.5% on the face value of the bonds. What is the net amount of funds that the debt issue will provide for the firm?

Question

Quizplus · Accepted Answer

The amount of fees paid by the firm is $5 million (2.5% of $200 million). Therefore, the net amount of funds raised by the firm is $195 million ($200 million - $5 million).

A Firm Issues $200 Million in Straight Bonds at Par