Definition of Net Interest Cost (NIC)

A statistical system that a company of bond uses to estimate the overall interest cost that is associated with their bond, which they will have to pay.

Brief Explanation of Net Interest Cost (NIC)

The system for Net Interest Cost (NIC) is depending on the common voucher amount calculated to years of adulthood and is modified for any associated discount rates or rates.

Debt providers sometimes use NIC to assess the offers from various underwriters and usually, prize the agreement to the distribute providing the smallest net interest. However, it may be a wrong way of choosing underwriters who could existing a low Net Interest Cost, but have a greater TIC (total interest cost) over the lifetime of the bond. The NIC system was developed before the extensive use of computer systems and is an easy, uncomplicated computation depending on the available bond details. When organizations issue bonds, they usually offer the bond to a syndicate of the underwriters, who consequently offer the bond to people. Thus, organizations research options and rates for the best cost from underwriters — that is, the one that creates the least interest cost over the life of the loan. NIC is used as one way to evaluate offers from the underwriters. But it’s not the only way.