Jia Hua Enterprises wants to issue sixty 20-year, $1,000 par value, zero-coupon bonds. If each bond is priced to yield 7 percent, how much will Jia Hua receive (ignoring issuance costs) when the bonds are first sold?

Question

Quizplus · Accepted Answer

The price of a zero-coupon bond is calculated using the formula: Price = Par Value / (1 + Yield)^Number of Years. For each bond: $1,000 / (1 + 0.07)^20 = $258.42. For sixty bonds: $258.42 * 60 = $15,505.

Jia Hua Enterprises Wants to Issue Sixty 20-Year, $1,000 Par