ABC has two financing alternatives. Calculate APY for each alternative. a. A publicly placed $20 million bond

Question:

ABC has two financing alternatives. Calculate APY for each alternative.

a. A publicly placed $20 million bond issue. Issuance costs are $1 million the bonds have a 7% coupon paid SEMI-ANNUAL with a 10-year life.

b. A privately placed $20 million bond issue. Issuance costs are $3 million; the bonds have a 7% ANNUAL coupon rate with a 10-year life.

Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a...