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Assume that the Tennessee Valley Power Authority (which is exempt from income taxes) issued $100,000 of 30-year maturity, 10 percent coupon, semiannual payment, tax-exempt bonds
Assume that the Tennessee Valley Power Authority (which is exempt from income taxes) issued $100,000 of 30-year maturity, 10 percent coupon, semiannual payment, tax-exempt bonds on January 1, 2000. The bonds were callable after 10 years, or after January 1, 2012, at a price that is 10 percent above the bonds' par value. On January 1, 2012, the Power Authority learns that it can issue $100,000 of new 20-year, semiannual payment, 8 percent coupon bonds at par. Costs associated with selling the new issue will amount to $2,000. What will be the initial cost of refunding? 10,000 100,000 2,000 12,000
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