Net interest cost is one measure of an issuer’s overall interest cost related to a bond issue, and may be used to pick the winning underwriter in a competitive sale. NIC looks at the issuer’s total interest expense – all coupon payments to bondholders, plus any discount or less any premium in relation to the overall amount of principal and time to maturity.
Unlike true interest cost, another measure of an issuer’s interest cost, net interest cost does not take into account the time value of money, or the idea that money today is worth more than the same amount of money in the future because it has time to earn interest. As a result, NIC is typically higher than TIC for the same bond issue.