Robertsons, Inc., is planning to expand its specialty stores into five other states and finance the expansion by issuing 15-year zero coupon bonds with a face value of $1,000. If your opportunity cost is 8 percent and similar bonds pay coupons semiannually, what will be the price at which you will be willing to purchase these bonds? (Round your answer to the nearest dollar.)

Question

Quizplus · Accepted Answer

The correct answer is A. The price of the bond is $308. The bond has a face value of $1,000 and a maturity of 15 years. The opportunity cost is 8%. The bond pays no coupons. The price of the bond is the present value of the face value discounted at the opportunity cost. The present value of $1,000 discounted at 8% for 15 years is $308.