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Homework answers / question archive / Alfa Corporation issued zero coupon bond to raise capital
Alfa Corporation issued zero coupon bond to raise capital. The bond has a face value of $1000 that will be matured after ten years. The required rate of return is 12%. What is the present value of the bond?
We can calculate the present value of the bond by using the following formula in excel:-
=-pv(rate,nper,pmt,fv)
Here,
PV = Present value of the bond
Rate = 12%
Nper = 10 periods
Pmt = 0
FV = $1,000
Substituting the values in formula:
= -pv(12%,10,0,1000)
= $321.97
