J&J Enterprises Wants to Issue 20-Year, $1,000 Face Value Zero-Coupon

question 83

Multiple Choice

J&J Enterprises wants to issue 20-year, $1,000 face value zero-coupon bonds. If each bond is to yield 8%, what is the minimum number of bonds J&J must sell if they wish to raise $2 million from the sale? (Use values in the dollar) (Ignore issuance costs.)

• A) 4,290
• B) 9,322
• C) 10,164
• D) 13,880
• E) 16,159

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Definitions:

Cash Equivalents

Short-term, highly liquid investments such as Treasury bills, commercial paper, and money market funds, that are made solely for the purpose of generating a return on temporarily idle funds.

Cash Flows

The total amount of money being transferred into and out of a business, especially as affecting liquidity.

Indirect Method

An approach used in cash flow statements to adjust net income for changes in non-cash items to calculate cash provided by operating activities.

Operating Activities

Transactions and events that pertain to the core business functions of an organization, influencing net income.