Same effective annual rate as the quarterly payment bonds

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Reference no: EM131014448

The U.S. Delay Corporation, a subsidiary of the Postal Service, must decide whether to issue zero coupon bonds or quarterly payment bonds to fund construction of new facilities. The 1,000 par value quarterly payment bonds would sell at $795.54, have a 10% annual coupon rate, and mature in 10 years. At what price would the zero coupon bonds with a maturity of 10 years have to sell to earn the same effective annual rate as the quarterly payment bonds?

Reference no: EM131014448

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