Stephens Security has two financing alternatives: 

(1). A publicly placed $50 million bond issue. Issuance costs are $1 million, the bond has a 9% coupon paid semiannually, and the bond has a 20-year life. 

 

(2). A $50 million private placement with a large pension fund. Issuance costs are $500,000, the bond has a 9.25% annual coupon, and the bond has a 20-year life.  Which alternative has the lower cost (annual percentage yield? 

Answer rating: 100% (QA)

1 n 40 r PV 50 1 49 PMT 9 2 x 50 225 ... View the full answer