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How much would me receive

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Question - ME's Treasurer is considering issuing additional debt denominated in Japanese yen. The company wants to issue zero-coupon bonds. These are bonds that make no periodic interest payments. Rather, they pay a single lump sum at maturity. Mitsubishi Electric is contemplating the issuance of five-year zero-coupon bonds with a value at maturity (i.e., a face value) of ¥100,000 million.

Required -

1. If the annual effective (i.e., market) interest rate on this type of debt is 3%, how much would ME receive when it issues the bonds? How much would the company receive if the market rate is 6%?

2. If instead, the zero-coupon bonds matured in 10 years, how much would ME receive?

Reference no: EM132579532

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