Homework Answers
a. 10,000 bonds @ $988 per bond = $9,8,80,000
Amount raised from investors = $10,093,000
Underwriting spread = $10,093,000 - $9,8,80,000 = $2,13,000
b. Percentage underwriting cost = Underwriting spread/Cost of bonds = $2,13,000/$9,8,80,000 = 2.16%
c. Although the total amount raised from investors is $10,093,000, the company will receive $9,8,80,000 after considering underwriting cost.
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