The App Store needs to raise $2.8 million for expansion.The firm wants to raise this money by selling 20-year, zero-coupon bonds with a par value of $1,000.The market yield on similar bonds is 6.49 percent.How many bonds must the company sell to raise the money it needs? Assume semiannual compounding.

Question

Quizplus · Accepted Answer

To find the number of bonds, calculate the present value of a bond using the formula: PV = F / (1 + r/n)^(nt), where F is the par value ($1,000), r is the market yield (0.0649), n is the number of compounding periods per year (2), and t is the number of years (20). Solve for PV and divide $2.8 million by this value to find the number of bonds needed.

The App Store Needs to Raise $2