Comparing borrowing costs stephens security has two financing alternatives:(1) a publicly placed $50 million bond issue. Issuance costs are $1million, the bond has a 9% coupon paid semi-annually, and the bond has 20 year life. (2) a $50 million private placement with a large pension fund, issuance cost are $500,000, the bond has a 9.25% annual coupon, and the bond has a 20 year life.
Which alternative has the lower cost annual percentage yield?