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Forestry company is looking to raise $ 5 m through the issue of 6 year deep discounted zero coupon bond. The issue price has been set at 40% discount .kelvin may invest but is looking for a return of 10 % per annum to do so?
Calculate the gross redemption yield on the deep discount Bond?
Sir i dont understand this question discount
This is very unlikely indeed for Paper F9 – where did you find this question?
However if they are issuing the debt at a discount, then for every $100 nominal they will only charge $60 (a 40% discount).
They will not pay any interest (this is what zero coupon means), but they will repay the full $100 on redemption.
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