Wilson Wonders's bonds have 12 years remaining to maturity. Interest is paid annu- ally, the bonds have a S1,000 par value, and
1 answer:
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Answer:
$224,174
Explanation:
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The Principle P that is required can be calculated from the given data though discounting future cash flows as follows :
FV = $1,000,000
r = 7½%
t = 20 × 12 = 240
P/yr = 12
Pmt = $0
PV = ?
Using a Financial Calculator to input the values as shown above, the PV would be $224,174 . Thus, the principal P that must be invested must be $224,174.
