True interest cost is used to compare bids and normally requires computer software.

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Multiple Choice

True interest cost is used to compare bids and normally requires computer software.

Explanation:
True interest cost measures the issuer’s actual borrowing cost by including all debt-service payments (principal and interest) and the price paid for the issue, reflecting the timing and amount of every cash flow. When comparing bids, TIC provides a single comparable measure that accounts for differences in coupon rates, prices, and call features, so you’re comparing the true cost rather than just nominal rates. Because TIC is essentially solving for the internal rate of return on a stream of payments, it requires computing present values across many cash flows, which is why software or financial calculators are normally used. Hand calculations are impractical for typical bond structures, making computer tools standard in this process.

True interest cost measures the issuer’s actual borrowing cost by including all debt-service payments (principal and interest) and the price paid for the issue, reflecting the timing and amount of every cash flow. When comparing bids, TIC provides a single comparable measure that accounts for differences in coupon rates, prices, and call features, so you’re comparing the true cost rather than just nominal rates. Because TIC is essentially solving for the internal rate of return on a stream of payments, it requires computing present values across many cash flows, which is why software or financial calculators are normally used. Hand calculations are impractical for typical bond structures, making computer tools standard in this process.

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