Face value= $1,000
coupon rate = 10% per year
Therefore annual interest= $100 =10%*1000
Current market price= 97.50% of par = $975 =97.5%*1000
Floatation cost= 10% of issue price
Therefore the company would get 90.00% of the issue price= $877.50 =90.%*975
Therefore yield= 11.40% =100/877.5
A more rigorous analysis would give the yield to maturity of 11.5% (see below)
but we will work with ...