An MNC makes a 60- day USD 50 million ECP issue. If the issue was priced...

An MNC makes a 60- day USD 50 million ECP issue. If the issue was priced at a discount of 4.2 percent (annualized, simple interest actual/ 360 convention) and fees totaled USD 200,000, what is the cost of financing? Format x.xx%

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Expert Solution

The required cost is the aggregate of discount amount and total fees.

Discount amount = Issue price × Annual rate × Days proportion

= $50,000,000 × 4.2% × (60 / 360)

= $350,000

Required cost = Discount amount + Total fees

= $350,000 + $200,000

= $550,000

Percentage expression of cost = (Required cost / Issue price) × 100

= ($550,000 / $50,000,000) × 100

= 1.10 %

jeff jeffy answered 1 year ago

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