Question

Your company wants to raise ​$10.5 million by issuing 30​-year ​zero-coupon bonds. If the yield to maturity on the bonds will be 5 % ​(annual compounded APR​), what total face value amount of bonds must you​ issue?

Answer 1

Step-by-step explanation:

K = N

Bond Price =∑ [(Annual Coupon)/(1 + YTM)^k] + Par value/(1 + YTM)^N

k=1

K =30

Bond Price =∑ [(0*1000/100)/(1 + 5/100)^k] + 1000/(1 + 5/100)^30

k=1

Bond Price = 231.3774487

Therefore, FV (total face value) to issue = amount to raise x par value/price = 10500000 x 1000 / 231.3774487 = 45380394.93