Alfa Corporation issued zero coupon bond to raise capital

Finance Aug 30, 2020

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?

Expert Solution

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

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