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ivolga24 [154]
2 years ago
10

A firm issues $300 million in straight bonds at an original issue discount of 0.50% and a coupon rate of 7%. The firm pays fees

of 2.0% 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?
A)$248,625,000
B)$263,250,000
C)$277,875,000
D)$292,500,000
Business
1 answer:
Aleksandr-060686 [28]2 years ago
7 0

Answer: $292,500,000

Explanation:

The following information can be derived from the question:

Issued bond = $300

Issue discount = 0.50%

Coupon rate = 7%.

Fees paid = 2.0%

The net amount of funds that the debt issue will provide for the firm will be:

= Issued bond price - Discount - Fees paid

= $300m - ($300m × 0.50%) - ($300m × 2.0%)

= $300m - $1.5m - $6m

= $300m - $7.5m

= $292.5 Million

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