J&J Enterprises wants to issue sixty 20-year, $1,000 zero-coupon bonds. If each bond is to yield 7%, how much will J&J receive (ignoring issuance costs) when the bonds are first sold?

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J&J Enterprises wants to issue sixty 20-year, $1,000 zero-coupon bonds. If each bond is to yield 7%, how much will J&J receive (ignoring issuance costs) when the bonds are first sold?

  1. A) $11,212
  2. B) $12,393
  3. C) $15,505
  4. D) $18,880
  5. E) $20,000
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Answer: C

Response: price = $1,000 / 1.0720 = $258.42; proceeds = $258.42 x 60 = $15,505

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