Question

the Bailey Brothers want to issue 20-year , zero coupon bonds that yield 9% .what price should it charge for these bonds if the face value is $1000?​

Answer 1

the amount charged is $178.43

Step-by-step explanation:

The computation of the price charged is shown below:

As we know that

Future value = Present value × (1 + rate)^number of years

So,

Present value = Future value ÷ (1 + rate)^no of years

= $1,000 ÷ (1 + 0.09)^20

= $1,000 ÷ 1.09^20

= $178.43

Hence, the amount charged is $178.43