Purchase incentive: How much does bond cost store?

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golazin

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A jewelry store advertises that for every $1000 spent on diamond jewelry the purchaser receives a $1000 is the full maturity value of zero-coupon bond, which the store purchases at a heavily reduced price. If the bond earns interest at the rate of 7.5% compounded quarterly and matures after 20 years, how much does the bond cost the store?
 
golazin said:
A jewelry store advertises that for every $1000 spent on diamond jewelry the purchaser receives a $1000 is the full maturity value of zero-coupon bond, which the store purchases at a heavily reduced price. If the bond earns interest at the rate of 7.5% compounded quarterly and matures after 20 years, how much does the bond cost the store?
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Please share with us your work/thoughts - so that we would know where to begin to help you.
 
golazin said:
A jewelry store advertises that for every $1000 spent on diamond jewelry the purchaser receives a $1000 is the full maturity value of zero-coupon bond, which the store purchases at a heavily reduced price. If the bond earns interest at the rate of 7.5% compounded quarterly and matures after 20 years, how much does the bond cost the store?
Click to expand...
Geeezzzzz....teachers that find it a must to make up little stories that only serve to confuse should be fired!
All that problem needs to state is:
What is the purchase price of a zero-coupon bond earning interest at 7.5% compounded quarterly, due in 20 years?
 
Notation is very bad. What does "4(80)" mean?

You have some idea on compouonding this time. Why?
 
oh sorry I made mistake it should be 4(20) what I meant is that X(1.01875) to the power of 4 times 20
 
golazin said:
oh sorry I made mistake it should be 4(20) what I meant is that X(1.01875) to the power of 4 times 20
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What is "X"? Is the power four, and then you multiply by twenty? Or is the power "four times twenty"? What is the base of the power?

Note: To learn how to format mathematics so others can understand, please review the formatting articles at the links you saw in the "Read Before Posting" thread that you read before posting. Thank you! :D

Eliz.
 
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