Zero-Coupon Bonds (aka Pure Discount)

Zero-Coupon Bonds - Zero-Coupon Bonds(aka Pure Discount Zeros pay no coupon payments and are sold at a discount from face An example of a

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Zero-Coupon Bonds (aka Pure Discount) Zeros pay no coupon payments and are sold at a discount from face. An example of a zero-coupon bond is a T- Bill. The entire return comes from the difference between the price and face value. The price is based on semi-annual 1 = ?% 0 1 2 3  4              5 -\$508.35                                                                  \$1,000

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Zero-Coupon Bond Example A firm wants to raise \$3 million by issuing 10-year, zero- coupon bonds with a face value of \$1,000. Its investment banker informs the firm that investors would require a 9.25% return. At what price would these bonds sell in the market place? How many bonds would the firm have to issue to raise \$3 million? 2
Zero-Coupon Bond Example A firm wants to raise \$3 million by issuing 10-year, zero-coupon bonds with a face value of \$1,000. Its investment banker informs the firm that investors would require a 9.25% return. 1.

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This note was uploaded on 01/26/2012 for the course FIN 4620 taught by Professor Patriciarobertson during the Spring '12 term at Kennesaw.

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Zero-Coupon Bonds - Zero-Coupon Bonds(aka Pure Discount Zeros pay no coupon payments and are sold at a discount from face An example of a

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