Cranjet inc. is issuing 10,000 bonds, and its investment banker has
The underwriting spread for Cranjet Inc.’s bond issue can be calculated by subtracting the guaranteed price of $974 per bond from its actual sale price of $10,200,000 / 10,000 bonds = $1,020 per bond. This gives us an underwriting spread of $46 per bond.
To calculate the percentage underwriting cost we would then take this amount and divide it by the guaranteed price as follows: Underwriting Cost % = (Underwriting Spread/ Guaranteed Price) x 100
In this case that would equate to (46/ 974) x 100 = 4.7% which means that Cranjet Inc.\’s investment banker charged a total fee equal to 4.7% of their original offering.
It is important to note that while this number may appear small; if we were to look at it on a dollar basis – i.e., in terms of how much they received in total fees – it amounts to almost half-a-million dollars ($460k). Therefore, when considering any potential investments or financing opportunities; investors should always factor in these costs so they have an accurate picture regarding expected returns going forward.
In conclusion, understanding the different components associated with debt offerings such as pricing & fees is essential when assessing their risk/return profiles – enabling investors to make more informed decisions going forward and helping maximize investor returns over time.
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
