On May 1 2018 Joe purchased 250000 in zerocoupon bonds that

On May 1, 2018, Joe purchased $250,000 in zero-coupon bonds that mature on May 1, 2038. The bonds pay no interest during the period of time they are outstanding. The interest rate for such borrowings is at 8%. Interest compounds annually. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided. Enter your answer rounded to the nearest whole dollar.)

Solution

Present value of the bond = 250,000/1.08^20

present value of the bond = 53,637.05