A Bank Is Going to Issue $5,000,000 in 10-Year Par

question 51

Multiple Choice

A bank is going to issue $5,000,000 in 10-year par value bonds that pay a 6% annual coupon.The bank must pay .5% of the face value in floatation costs.What is the bank's effective cost of borrowing?

• A)5.9%
• B)6.1%
• C)6.3%
• D)6.5%
• E)6.7%

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Definitions:

Individualistic Culture

Cultures in which personal achievements and independence are highly valued, emphasizing the importance of individual goals over group goals.

Belief Perseverance

The phenomenon where individuals maintain their beliefs even in the face of contradictory evidence.

Fundamental Attribution Error

The tendency to overemphasize personal characteristics and ignore situational factors in explaining others' behavior.

Overjustification Effect

A phenomenon where providing external incentives for an activity already intrinsically rewarding leads to a decrease in intrinsic motivation.