Elise's Crafts needs $225,000 today to purchase some new equipment. The ﬁrm is a planning on issuing 10-year zero coupon bonds. The current market rate of interest is 6.5%. How many bonds
Must Elise's Crafts sell to raise the money they need?

Question

Quizplus · Accepted Answer

To find the number of zero coupon bonds needed, calculate the present value of a bond using the formula: PV = F / (1 + r)^n, where F is the face value (assumed $1,000), r is the interest rate (0.065), and n is the number of years (10). Solve for the number of bonds: $225,000 / PV.

Elise's Crafts Needs $225,000 Today to Purchase Some New Equipment