The MerryWeather Firm wants to raise $25 million to expand its business. To accomplish this, the...
The MerryWeather Firm wants to raise $25 million to expand its business. To accomplish this, the firm plans to sell 20-year, $1,000 face value zero-coupon bonds. The bonds will be priced to yield 7 percent. What is the minimum number of bonds the firm must sell to raise the $25 million it needs? Use annual compounding.
Homework Answers
We need to compute the the price of zero coupon bond
V = 1000/3.869684
V = $258.42
Amount required = $25,000,000
Number of Bonds = $25,000,000/$258.42 = 96,742.11
Hence, company needs to sell at least 96,743 bonds. (96,742.11 exact)
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