Problem:

Discuss the process of a firm going through a security issue by providing a through explanation of each stage. Be sure to address differences in the ways an issue can be brought to market, the decision making process for the issuing firm, risk factors, the role of the underwriter, under pricing effects, and other pertinent issues.

Your money is tied up and you need to borrow $10,000. The following two alternatives are available at different banks: (1) Pay $3,311.61 at the end of each year for 5 years, starting at the end of the first year (5 payments total at 18 percent nominal per year compounded monthly which equates to 19.56 percent effective); or (2) pay $253.93 at the end of each month for 5 years, starting at the end of the first month (60 payments total at 18 percent nominal per year compounded monthly).

Required:

Which will result in the smaller PW of payments to you if:

1) Your TVOM is 14 percent nominal per year compounded monthly?

2) Your TVOM is 19 percent nominal per year compounded monthly?

Please provide all working out and formulas.