The MerryWeather Firm wants to raise $10 million to expand its business. To accomplish this,it plans to sell 30-year,$1,000 face value zero-coupon bonds. The bonds will be priced to yield 6%. What is the minimum number of bonds it must sell to raise the $10 million it needs?
A) 47,411
B) 52,667
C) 57,435
D) 60,000
E) 117,435

Question

Quizplus · Accepted Answer

To find the minimum number of bonds needed to raise $10 million, we need to calculate the price of one bond first:

PV = FV/(1+r)^n
PV = 1000/(1+0.06)^30
PV = $174.32

Therefore, MerryWeather Firm needs to sell $10,000,000/$174.32 = 57,435 bonds to raise the $10 million it needs. Therefore, the correct answer is (C) 57,435.

The MerryWeather Firm Wants to Raise $10 Million to Expand