A $100,000 5-year 7% bond is issued on January 1, 2020. The bond pays interest annually. The market rate is 8%. What is the selling price of the bonds, rounded to nearest dollar?

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The selling price of the bond is calculated using the present value of its future cash flows, which include the annual interest payments and the principal amount at maturity. The annual interest payment is $100,000 * 7% = $7,000. The present value of the interest payments (an annuity) is calculated using the market interest rate of 8%. The present value of the principal amount ($100,000) is also discounted at the market rate of 8%. The formula for the present value of an annuity is PV = PMT * [(1 - (1 + r)^-n) / r], where PMT is the annual payment, r is the market interest rate per period, and n is the number of periods. The present value of the principal is calculated using the formula PV = FV / (1 + r)^n, where FV is the future value or principal amount. Adding these two present values gives the selling price of the bond.

A $100,000 5-Year 7% Bond Is Issued on January 1