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Part 1

Your firm is issuing 

​$101101 

million in straight bonds at par with a coupon rate of 

5.5 %5.5% 

and paying total fees of 

3.1 %3.1%. 

What is the net amount of funds that the debt issue will provide for your​ firm?

To find the net amount of funds that the debt issue will provide, we need to account for the total fees that will be deducted from the gross amount raised by issuing the bonds. Here's how to approach it step by step:

### Step 1: Gross Amount Raised
The firm is issuing $101.101 million in straight bonds, so the gross amount raised is:

\[
\text{Gross Amount} = 101.101 \, \text{million dollars}
\]

### Step 2: Calculate the Total Fees
The firm will incur fees of 3.1%, so we need to find the amount of fees:

\[
\text{Fees} = \text{Gross Amount} \times \left( \frac{3.1}{100} \right) = 101.101 \times 0.031 = 3.134131 \, \text{million dollars}
\]

### Step 3: Calculate the Net Amount Raised
The net amount of funds that the firm will receive is the gross amount minus the fees:

\[
\text{Net Amount} = \text{Gross Amount} - \text{Fees} = 101.101 - 3.134131 = 97.966869 \, \text{million dollars}
\]

### Final Answer:
The net amount of funds that the debt issue will provide for your firm is approximately **$97.97 million**.

Would you like further details or have any other questions?

Here are 5 related questions to expand on this:

1. How do changes in the coupon rate affect the cost of issuing bonds?
2. What are the different types of fees typically associated with bond issuance?
3. How do firms decide between issuing straight bonds and convertible bonds?
4. How does the bond’s par value relate to the amount of funds raised?
5. How does the market interest rate impact the value of newly issued bonds?

**Tip:** Always factor in issuance costs when calculating the actual funds raised from bond issues to understand the true cost to the firm.

Your firm is issuing $101.101 million in straight bonds at par with a coupon rate of 5.5% and paying total fees of 3.1%. What is the net amount of funds that the debt issue will provide for your firm?

Learn how to calculate the net amount of funds from a bond issue of $101.101 million with a 5.5% coupon rate and 3.1% fees. This financial math problem involves calculating fees and net fund amounts, essential for understanding bond issuance costs.

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