Question

A company has decided to issue 30-year zero-coupon bonds to raise funds. The required return on the bonds will be 9% and face value will be $1,000. What will these bonds sell for at issuance? Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit any commas and the $ sign in your response. For example, an answer of $1,000.50 should be entered as 1000.50

Answer 1

K = N

Bond Price =∑ [(Annual Coupon)/(1 + YTM)^k]     +   Par value/(1 + YTM)^N

k=1

K =30

Bond Price =∑ [(0*1000/100)/(1 + 9/100)^k]     +   1000/(1 + 9/100)^30

k=1

Bond Price = 75.37

Using Calculator: press buttons "2ND"+"FV" then assign

PMT = Par value * coupon %=1000*0/(100)

I/Y =9

N =30

FV =1000

CPT PV

Using Excel

=PV(rate,nper,pmt,FV,type)

=PV(9/(100),30,-0*1000/(100),-1000,)