Wal-Mart plans to open a new store near Campus. Wal-Mart is going to finance via bond market and stock market. Total capital required is 10 million dollars. 7 million dollars are going to be borrowed from the bond market. This 3% annual coupon bond is traded in the market for $950 and is going to be matured in 10 years. Flotation fee is 7% of the price of the bond. Tax rate is 40%. How much is the cost of debt of Wal-Mart? （Hint: This is an annual coupon bond, not a semi-annual coupon bond） 68%
Monetary Policy and Interest Rate
Monetary policy refers to the policy which is enforced by the central bank of the country to control the money supply and economic development of the country. The main aim of monetary policy is to manage inflation, consumption, and growth of the economy. The central bank influences interest rates to manage the money supply. In monetary policy, the central bank may revise the interest rate to increase and decrease the flow of money.
Development of the US Monetary System
The monetary system of a country refers to the system in which a government provides money in the economy of the country. In the modern-day monetary system, usually it contains the National Treasury, the mint where the notes are being printed. The Central bank and the commercial banks regulate the money supply in the economy of a country.
- Wal-Mart plans to open a new store near Campus. Wal-Mart is going to finance via bond market and stock market. Total capital required is 10 million dollars. 7 million dollars are going to be borrowed from the bond market. This 3% annual coupon bond is traded in the market for $950 and is going to be matured in 10 years. Flotation fee is 7% of the price of the bond. Tax rate is 40%. How much is the cost of debt of Wal-Mart? （Hint: This is an annual coupon bond, not a semi-annual coupon bond）
- 68%
- 75%
- 57%
- 81%
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