Minion Central Ltd is raising debt capital to fund a new movie. Their investment bankers have come up with the following three alternatives. Rank them in order of attractiveness:

1. A 10-year zero-coupon bond. Minion Central will receive $5,000,000 today and will repay $7,975,427 in exactly 10 years.

2. A 10-year bank loan with monthly payments. The bank will charge an up-front fee of $15,000. Minion Central will borrow enough to receive $5,000,000 today after paying the fee. The bank rate on this loan is 4.6%p.a. compounded monthly.

3. A 10-year bond paying quarterly coupons with a face value of $5,025,000 and a coupon rate of 4.61%.

The fee for issuing the bond is $25,000, so Minion Central will receive exactly $5,000,000 today. Solution strategy: compute the effective cost of each alternative, then rank.