Chapter 5, Problem 5.6DMP

(1)

To determine

Present Value:

The value of today’s amount to be paid or received in the future at a compound interest rate is called as present value. The following formula is used to calculate the present value of an amount:

$\text{Present value of an amount = }\frac{\text{Future value}}{{\left(\text{1 + interest rate}\right)}^{\text{number}\text{of}\text{periods}}}$

To determine: The maturity value of the zero-coupon bonds that J.J will pay bondholders at the beginning of 2020.

(2)

To determine

The issue price at the beginning of 2000 of a single $1,000 maturity-value bond.