You own a thriving bookstore in a major college town.You have been talking with your CA about borrowing $5,000,000 to finance a larger and more modern building.One option is to issue 20-year bonds with a fixed rate of 8% while another option is to issue 20-year bonds with a variable rate of one-year LIBOR (London Interbank Offered Rate)plus 5%.For the first year,this will result in a 6.2% rate,but the rate will be adjusted annually.The current market interest rate is 8%.
What things should you consider in making the decision about which borrowing option is better for your company?

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You own a thriving bookstore in a major college town.You have been talking with your CA about borrowing $5,000,000 to finance a larger and more modern building.One option is to issue 20-year bonds with a fixed rate of 8% while another option is to issue 20-year bonds with a variable rate of one-year LIBOR (London Interbank Offered Rate)plus 5%.For the first year,this will result in a 6.2% rate,but the rate will be adjusted annually.The current market interest rate is 8%.
What things should you consider in making the decision about which borrowing option is better for your company?

You Own a Thriving Bookstore in a Major College Town