Finding fair value of a zero coupon bond
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Jia Hua Enterprises wants to issue sixty 20-year, $1,000 par value, zero-coupon bonds. If each bond is priced to yield 7% , how much will Jia Hua receive ( ignoring issuance costs) when the bonds are first sold?
A. $18,880
B $12,393
C. $20,000
D. $15,505
E $11,212
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Solution Summary
Solution describes the steps to find fair value of a zero coupon bond.
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Solution:
PV of such 20-year zero coupon bond is given by
PV=FV/(1+r)^n
Where ...
Education
- BEng (Hons) , Birla Institute of Technology and Science, India
- MSc (Hons) , Birla Institute of Technology and Science, India
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