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John Moffat.
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Kevin1107
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Hello sir,
This may be a silly doubt.
the bond is issued at premium, so I think the first year interest expense after tax maybe
Additional finance cost (BV*YTM*0.75)=(60m/100*109.9*6.43%*0.75) =(3179)But answer is Additional finance cost ($60m x 7·5% x 0·75) (3,375 )
Can I assume that the answer simplifies the process, it seems to think that this bond is issue at par value.Many thanks.
John Moffat
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No. Interest is always based on the nominal value, regardless of the price at which the bond was issued.
Kevin1107
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