"You Decide" Essay
You own a thriving book store in a major college town. You have been talking with your CPA 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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The Answer of "You Decide" Essay
You own a thriving book store in a major college town. You have been talking with your CPA 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 Decide" Essay You Own a Thriving Book Store in a Major College