CFA Practice Question

There are 520 practice questions for this study session.

CFA Practice Question

The Mod Company issued a zero-coupon bond on January 1, 20x0, due December 31, 20x4. The face value of the bond was $100,000. The bond was issued at an effective rate of 14% (compounded annually). The CFO before interest and tax in each year is $60,000. EBIT in each year is $70,000.

The cash proceeds of the bond issue are ______.
A. $51,937
B. $100,000
C. $60,000
Explanation: Cash proceeds on a bond: 100,000/(1.14)5 = $51,937

User Contributed Comments 6

User Comment
danlan Cash proceeds means the purchase price.
andy4cfa CFO and EBIT are not relevant for the calculation of bond price here?
Bibhu CFO and EBIT not relevant in this question. Cash proceeds means purchase price or PV of the bond.
N = 5, I/Y =14, FV= 100,000, PMT= 0, CPT - PV.
mbowa noted about the cash proceeds
GBolt93 wasted so much time trying to figure out the coupon before I reread and realized it was a zero coupon bond...
MapherRdz Why is N=5? I dont get it
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