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Finding fair value of a zero coupon bond

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:

PV of such 20-year zero coupon bond is given by
PV=FV/(1+r)^n
Where ...

Solution Summary

Solution describes the steps to find fair value of a zero coupon bond.

$2.19