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wel
3 years ago
8

Navarro, Inc., plans to issue new zero coupon bonds with a par value of $1,000 to fund a new project. The bonds will have a YTM

of 5.43 percent and mature in 20 years. If we assume semiannual compounding, at what price will the bonds sell?
Business
1 answer:
pogonyaev3 years ago
4 0

Answer:

Bond Value is $347.30

Explanation:

Zero coupon bond does not offer any return on the bond that's why it is issued on deep discount value.

Number of years = n = 20 years

Face value = F = $1,000

YTM = 5.43%

Price of the Bond = [ F / ( 1 + r )^n ]

Price of the Bond =[ $1,000 / ( 1 + 5.43% )^20 ]

Price of the Bond =[ $1,000 / ( 1.0543 )^20 ]

Price of the Bond = 347.30

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