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J&J Enterprises wants to issue eighty 20-year, $1,000 zero-coupon bonds. If each bond is to yield 8%, how much will J&J receive (ignoring issuance costs) when the bonds are first sold?

Respuesta :

jepessoa

Answer:

$17,163.86

Explanation:

to calculate how much J&J Enterprises will receive, we need to determine the present value of one bond:

present value = future value / (1 + interest rate)ⁿ

  • future value = face value = $1,000
  • interest rate = 8%
  • n = 20 years

present value = $1,000 / (1 + 8%)²⁰ = $1,000 / 1.08²⁰ = $1,000 / 4.66 = $214.55 per bond x 80 bonds = $17,163.86

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