Rapid River, Inc., has a 7.5% coupon bond that matures in 9 years. The bond pays interest semi-annually. What is the market price of a $1,000 face value bond if the yield to maturity is 6.8%?

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The market price of a bond can be calculated using the formula for the present value of an annuity (for the semi-annual interest payments) plus the present value of a lump sum (for the face value of the bond). Given a 7.5% annual coupon rate with semi-annual payments, the semi-annual coupon payment is $37.50 ($1,000 * 7.5% / 2). The yield per period (semi-annual) is 3.4% (6.8% / 2), and there are 18 periods (9 years * 2). The present value of the annuity (interest payments) is calculated using the formula PV = P * [(1 - (1 + r)^-n) / r], and the present value of the lump sum (face value) is calculated using the formula PV = F / (1 + r)^n, where P is the payment per period, r is the rate per period, n is the number of periods, and F is the face value. Plugging in the numbers:PV of annuity = $37.50 * [(1 - (1 + 0.034)^-18) / 0.034] ≈ $560.55PV of lump sum = $1,000 / (1 + 0.034)^18 ≈ $485.99Adding these two components gives the market price of the bond: $560.55 + $485.99 ≈ $1,046.55.