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What will be your initial investment

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Reference no: EM133148400

Question - A company approaches a bank for a loan. The company promises to repay an interim $5mn in exactly two years' time and a final amount of $10mn in exactly five years' time.

Say you also use PDV methods to make an investment in an 8yr zero coupon security that promises $100mn on redemption. At the time of purchase the "going" (accrued annually, that is, arithmetically compounded) interest rate is 5%.

Required - What will be your initial investment (the price paid for the security)?

Reference no: EM133148400

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