Net Interest Cost (NIC)

AAA

DEFINITION of 'Net Interest Cost (NIC)'

A mathematical formula that an issuer of bonds uses to compute the overall interest expense that is associated with their bonds, which they will have to pay. The formula for net interest cost (NIC) is based on the average coupon rate weighted to years of maturity, and is adjusted for any associated discounts or premiums.

INVESTOPEDIA EXPLAINS 'Net Interest Cost (NIC)'

Debt issuers sometimes use NIC to evaluate the bids from various underwriters and usually award the contract to the syndicate offering the lowest net interest.

However, it may be an incorrect method of selecting underwriters who could present a low NIC, but have a higher TIC (total interest cost) over the lifetime of the bond.

The NIC formula was created before the widespread use of computers and is a simple, straightforward calculation based on available bond information.

RELATED TERMS
  1. Bond

    A debt investment in which an investor loans money to an entity ...
  2. Municipal Bond

    A debt security issued by a state, municipality or county to ...
  3. Underwriter

    A company or other entity that administers the public issuance ...
  4. Coupon

    The interest rate stated on a bond when it's issued. The coupon ...
  5. Maturity

    The period of time for which a financial instrument remains outstanding. ...
  6. Investment Bank - IB

    A financial intermediary that performs a variety of services. ...
Related Articles
  1. The Advantages Of Bonds
    Investing

    The Advantages Of Bonds

  2. Corporate Bonds: An Introduction To ...
    Bonds & Fixed Income

    Corporate Bonds: An Introduction To ...

  3. Callable Bonds: Leading A Double Life
    Options & Futures

    Callable Bonds: Leading A Double Life

  4. Evaluating Bond Funds: Keeping It Simple
    Mutual Funds & ETFs

    Evaluating Bond Funds: Keeping It Simple

Hot Definitions
  1. Return On Sales - ROS

    A ratio widely used to evaluate a company's operational efficiency. ROS is also known as a firm's "operating profit margin". ...
  2. Halloween Strategy

    An investment technique in which an investor sells stocks before May 1 and refrains from reinvesting in the stock market ...
  3. Halloween Massacre

    Canada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, ...
  4. Zombies

    Companies that continue to operate even though they are insolvent or near bankruptcy. Zombies often become casualties to ...
  5. Witching Hour

    The last hour of stock trading between 3pm (when the bond market closes) and 4pm EST. Witching hour is typically controlled ...
  6. October Effect

    The theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological ...
Trading Center