What does True Interest Cost (TIC) represent in relation to bonds?

True Interest Cost (TIC) is a critical metric used in bond financing that specifically represents the effective interest rate a municipality or entity pays on a bond over its life. It takes into account not only the stated interest rates on the bonds but also the purchase price that investors pay for those bonds. By considering both these elements, TIC provides a more comprehensive picture of the cost of borrowing than just the nominal interest rate would alone.

This integration is essential because the price at which a bond is sold can differ from its face value. If a bond is sold at a premium or discount, TIC captures that dynamic, reflecting the actual cost to the issuer in terms of cash flow. This is significantly beneficial for investors evaluating the attractiveness of different bonds, enabling them to make more informed decisions based on the true fiscal obligation linked to the bonds.

In contrast, other options provide different aspects related to bonds but do not accurately define TIC. The total expected return on the investment relates more closely to the investor's perspective rather than the issuer's cost of borrowing. The fees associated with issuing bonds, while important, do not directly reflect the interest cost. Finally, the sum of all principal and interest to be paid could be useful in assessing the overall financial obligation but does not account