Question

Arts and Crafts Warehouse wants to issue 15-year, zero-coupon bonds that yield 7.5 percent. What price should it charge for these bonds if the face value is $1,000? Assume semiannual compounding.

Answer 1

$PV=\frac{1,000}{1+\frac{.075}{2}^{2*15} } =331.40$

They should charge $331.40 for these bonds if the face value is $1,000.