The issuance costs of new debt securities can be ignored since those costs will not be reflected in the yield to maturity of the debt in the future.

Question

Quizplus · Accepted Answer

The issuance costs of new debt securities, such as underwriting fees, legal fees, and other expenses, are typically included in the total cost of issuing the debt. This total cost affects the effective interest rate of the debt, which in turn affects the yield to maturity. Therefore, the issuance costs cannot be ignored as they are an important factor in calculating the effective yield to maturity of the debt.

The Issuance Costs of New Debt Securities Can Be Ignored