Zero coupon bonds pay no interest—the only cash investors receive is the lump-sum principal payment at maturity. On January 1, 2008, The Ledge Inc. issued $250 million of zero coupon bonds at a market yield rate of 12%. The bonds mature in 20 years.
Required:
1. What was the January 1, 2008 issue price of these zero coupon bonds?
2. How much interest expense will The Ledge record on the bonds in 2008?