Explore BrainMass

Explore BrainMass

    IBM wishes to raise $1 billion and is trying to decide betwe

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    IBM wishes to raise $1 billion and is trying to decide between a domestic dollar bond issue and a Eurobond issue. The U.S. bond can be issued at a coupon of 6.75 percent, paid quarterly, with underwriting and other expenses totaling 0.95 percent of the issue size. The Eurobond would cost only 0.55 percent to issue but would bear a semi-annual coupon of 6.88 percent. Both issues would mature in ten years.

    Assuming all else is equal, which is the least expensive issue for IBM?

    And what other factors might IBM want to consider before deciding which bond to issue?

    © BrainMass Inc. brainmass.com June 3, 2020, 7:33 pm ad1c9bdddf
    https://brainmass.com/business/bond-valuation/ibm-wishes-to-raise-1-billion-and-is-trying-to-decide-betwe-103597

    Solution Preview

    a. Assuming all else is equal, which is the least expensive issue for IBM?
    The least expensive issue is the one with lower yield to maturity (YTM). I have used Excel to ...

    Solution Summary

    The solution provides detailed explanations and instructions for the IBM bond issue problem.

    $2.19

    ADVERTISEMENT