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 $1,000.00 par value quarterly payment bonds would sell at $795.54, have a 4.50% 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? Do not round your intermediate calculations.
A. $551.68
B. $561.28
C. $479.72
D. $369.39
E. $527.70
Answer: C
Business
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