Question: The state of Idaho needs to raise 50 000 000 for highway
The state of Idaho needs to raise $50,000,000 for highway repairs. Officials are considering issuing zero coupon bonds, which do not require periodic interest payments. The current market interest rate for the bonds is 10 percent. What face value of bonds must be issued to raise the needed funds, assuming the bonds will be due in 30 years and compounded annually? How would your answer change if the bonds were due in 50 years? How would both answers change if the market interest rate were 8 percent instead of 10 percent?
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