How many bonds will home improvement need to sell

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Problem 1: Home Improvement, Inc. needs to raise $3.00 million to finance plant expansion. In discussions with its investment bank, Home Improvement learns that the bankers recommend a debt issue with a gross proceeds of $1,000 per bond and they will charge an underwriter's spread of 7 percent of the gross proceeds. How many bonds will Home Improvement need to sell in order to receive the $3.00 million they need?

Problem 2: You have approached your local bank for a start-up loan commitment for $1,600,000 needed to open an auto repair store. You have requested that the term of the loan be one-year. Your bank has offered you the following terms: size of loan commitment = $1,600,000, term = 1 year, up-front fee = 20 basis points, back-end fee = 60 basis points. If you take down 85 percent of the total loan commitment, calculate the total fees you have paid on this loan commitment.

Reference no: EM132616732

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