Assume a zero-coupon bond was issued with a face value of $1 000 000 and net proceeds from the issue were 95% of this amount. If the bond had 10 years to maturity, calculate the approximate before-tax cost of this zero-coupon bond: Select one: A. 0.51% B. 5% O C. 12% O D. 5.21%

Assume a zero-coupon bond was issued with a face value of $1 000 000 and net proceeds from the issue were 95% of this amount. If the bond had 10 years to maturity, calculate the approximate before-tax cost of this zero-coupon bond: Select one: A. 0.51% B. 5% O C. 12% O D. 5.21%

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

Assume a zero-coupon bond was issued with a face value of $1 000 000 and net proceeds from the issue were 95% of
this amount. If the bond had 10 years to maturity, calculate the approximate before-tax cost of this zero-coupon
bond:
Select one:
O
O
A. 0.51%
B. 5%
C. 12%
D. 5.21%
<

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