JCPenney Company was one of the first companies to issue zero coupon bonds. It issued bonds with i lace (maturity) value of $400 million due eight years after issuance. When the bonds were sold to the similar bonds paid 15 percent effective interest. An article in Forbes magazine discussed the K mev bonds and stated: "It's easy to see why corporations like to sell bonds that don't pay interest Bui why would anybody want to buy that kind of paper [bond]'?"

Required: 1. Explain why an investor would buy a JCPenney bond with a zero interest rate. 2. If investors could earn 15 percent on similar investments, how much did JCPenney receive when it issued the bonds with a face value of $400 million?