An underwriter foresees that ABC’s P10,000,000 face value bonds can be sold at P10,500,000. However, ABC will only be collecting 99% of the issuance price as the underwriter will be charging 1% of the issuance price as flotation cost. The nominal rate is 8% due at the end of each of the 5 years of its term. What is the expected effective cost of the bond based on the

An underwriter foresees that ABC’s P10,000,000 face value bonds can be sold at P10,500,000. However, ABC will only be collecting 99% of the issuance price as the underwriter will be charging 1% of the issuance price as flotation cost. The nominal rate is 8% due at the end of each of the 5 years of its term. What is the expected effective cost of the bond based on the

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 9P

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ABC will be issuing a non- interest-bearing bond that has a face value of P10,000,000, term of 5 years, and net proceeds of P6,375,000. 2. How much is the effective cost of the bonds?
ABC Corporation plans to issue a 9%, 10-year, P5,000,000 face value bonds. It will incur P500,000 as underwriting fee. What is the cost of the bond based on the following methods? 1. Yield to maturity formula 2.Trial and error method (closest percent, 3 decimal places)
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What is the solution for the attached quesjtom and the method? Thank you very much.