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Zero Coupon Bond

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Telsa Corporation needs to raise funds to finance a plant expansion, and it has decided to issue 25-year zero coupon vonds to raise the money. The required return on the bonds will be 9 percent.

A. What will these bonds sell for at issuance?
b. Using IRA amortization rul, what interest deduction can the company take on these bonds in the first year" In the last year?
c. Repeat part (b) using the straight-line method for the interst deduction.
d. Based on your answers in (b) and (c), which interest deduction method would Telsa Corporation prefer? Why?

Use the Excel Spreadsheet.

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The solution answers a question on Zero- Coupon Bond using Excel functions.

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