J&J Enterprises wants to issue eighty 20-year, $1,000 zero-coupon bonds. If each bond is to yield 8%, how much will J&J receive (ignoring issuance costs) when the bonds are first sold?

Question

Quizplus · Accepted Answer

The present value of a zero-coupon bond is calculated using the formula PV = F / (1 + r)^n, where F is the face value, r is the yield, and n is the number of years. For one bond: PV = $1,000 / (1 + 0.08)^20 = $214.55. For eighty bonds: $214.55 * 80 = $17,164.

J&J Enterprises Wants to Issue Eighty 20-Year, $1,000 Zero-Coupon Bonds