During November 2017, Southwest Airlines issued five-year notes with a face value of $300 million. The stated
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During November 2017, Southwest Airlines issued five-year notes with a face value of $300 million. The stated interest rate on the notes was 2.8 percent, and proceeds from the issuance approximated $300 million.
a. Estimate the effective interest rate of the issuance.
b. Compute the interest expense associated with this note recorded in 2017.
c. Explain why the market paid $300 million for these notes.
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a Effective interest rate Effective interest rate 1R where R 28 b Interest expense for the year 9970...View the full answer
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