The MerryWeather Firm wants to raise $29 million to expand its business. To acco

Question

The MerryWeather Firm wants to raise $29 million to expand its business. To accomplish this, the firm plans to sell 15-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 $29 million it needs? Use annual compounding.

80,012

29,000

40,006

206,313

412,627

The MerryWeather Firm wants to raise $29 million to expand its business. To accomplish this, the firm plans to sell 15-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 $29 million it needs? Use annual compounding.

Explanation / Answer

finance need to expand business = $ 29

term = 15years

Face value = $1000

yeild = 7%

value of bond = $1000*0.62275 = $622.75

minimum number of bonds firm must sell to raise finance = $ 29 million / $622.75 = 46567.64

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