JCPenney Company was one of the first companies to issue zero-coupon bonds. An article in Forbes magazine discussed the JCPenney bonds and stated: It's easy to see why corporations like to sell bonds that don't pay interest. Buy why would anybody want to buy that kind of paper [bond]? An example of a zero-coupon bond is the following: Bonds with a face (maturity) value of $200 million due in five years after issuance. There are no periodic interest payments on the bond (i.e., the coupon rate is 0%). When the bonds were sold to the public, similar bonds paid 9 percent effective interest (i.e., the market rate is 0%). Required: 1. Explain why an investor would buy a bond with zero coupons. 2. If investors could earn 9 percent on similar investments, what is your best estimate of how much the above bond would sell for when it issued the bonds with a face value of $200 million? You can use the tables in your text, your financial calculator, or preferably Excel to calculate the price of the bond. 3. Assuming the bond is issued in January of 2014, complete the below amortization schedule for the bond. It will require you to calculate the present value of the bond. You can use the NPV or PV function in EXCEL. Date (Net) Book Value Coupon Payment Interest Expense Discount Amortization 1/1/2014 12/31/2014 12/31/2015 12/31/2016 12/31/2017 12/31/2018 4. What journal entries would the firm make over the life of the bond? 1/1/14 12/31/2014 12/31/2015 12/31/2016 12/31/2017 12/31/2018 Assuming the firm issued the bonds in January of 2014, how much interest expense will the firm recognize in 2014 on the bonds? What would be the value of the bonds recognized on the firm's balance sheet at December 31, 2014