Calculating Costs of Issuing Debt American Movers, Inc

question 29

Multiple Choice

Calculating Costs of Issuing Debt American Movers, Inc., needs to raise $5 million to finance an expansion. In discussions with its investment bank, American learns that the bankers recommend a debt issue with gross proceeds of $1,000 per bond and they will charge an underwriter's spread of 5 percent of the gross proceeds. How many bonds will Home Improvement need to sell in order to receive the $5 million they need?

• A) 4,750
• B) 5,000
• C) 5,250
• D) 5,264

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