Comparing Borrowing Costs of a bond (APY)
In previous assignments I have done the opposite, but I am having trouble looking at it from this perspective.
I am given two scenarios with different issuance costs and different coupon (at different intervals). I am supposed to find out which scenario offers the lowest APY...
I am totally stuck on this one.
The formula for APY is:
=[(1 + periodic rate)^# of periods] - 1
For this calculation, do we subtract the issuance costs from the whole bond amount (less to repay to the purchaser?) I am really not sure what to do with this value...
Is the periodic rate the coupon payment converted to annually.
Any guidance on this would be greatly appreciated.
Thank you,