please show work so I can learn....if not it may get a poor rating....thank you

Question

please show work so I can learn....if not it may get a poor rating....thank you

Filkins Farm Equipment needs to raise $4.5 million for expansion. and it Expects that five year zero coupon bonds can be sold at a price of $567.44 for each $1.000 bond

a. how many 1000 par value zero coupon bonds would Filkins have to sell to raise the needed 4.5 million

b. what will be the burden of this bond issue on the future cash flows generated by filkins? what will be the annual debt service costs?

c. what is the yield to maturity on the bonds?

Explanation / Answer

a) as they want to made $4.5 million and price of bond = $567.44 so they need to issue = 4.5million /567.44 = 4.5*10^6 / 567.44 = 7930 bonds b) there wont be annual interest . because it is zero coupon bond c) yeild to maturity = 567.44 = 1000/(1+r)^5 solving for r we get yield to maturity

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