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Calculating the expected capital from a new bond issue

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XYZ Motors just issued 225,000 zero coupon bonds. These bonds mature in 20 years, have a par value of $1,000, and have a yield to maturity of 7.45 per cent. What is the approximate total amount of money the company raised from issuing these bonds? (Assume semi-annual compounding)

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Solution Summary

Solution depicts the steps to estimate the expected capital raised from issuing bonds in the given case.

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YTM=r=7.45%/2=3.725% semi annually
Number of periods=n=20*2=40 half ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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